Eskom has taken its most drastic step yet to collect money that municipalities owe it. The group has seized the bank account of the biggest offender, the Maluti a Phofung municipality.
The seizure of Maluti a Phofung’s cash comes as Eskom shows a dramatically stepped-up approach to debt recovery and theft of electricity under the leadership of CEO André de Ruyter. The power utility has also begun to play hardball with certain communities, implementing "load reduction" — effectively electricity blackouts — in areas where illegal connections are rife.
The Maluti a Phofung municipality in the Free State includes the town of Harrismith. It owes Eskom R5.3bn in unpaid electricity bills. Municipalities and residents all over SA owed Eskom R30.9bn at the end of June. Municipal debt has been rising at a rate of R1bn a month.
Eskom’s action means the Maluti a Phofung municipality will not be able to pay salaries as month-end approaches. On Wednesday, large parts of Soweto, several Vaal townships and Cosmo City and Zandspruit were dropped from the grid at the evening peak. On Tuesday, other parts of Soweto and the Vaal area were dropped.
This was "to avoid network overloading in high-density areas that are prone to illegal connections, meter bypasses and vandalism of electricity infrastructure", Eskom said.
The power utility has tried for several years to commit Maluti a Phofung to a payment plan without success.
The court order to seize the council’s assets was secured in 2018, but not implemented at the time. Eskom also implemented periodic electricity blackouts of the entire municipal area of Maluti and several towns to force payment.
But in 2018, businesses in Maluti a Phofung and Emfuleni — that had paid their bills over to the municipality — obtained court orders that stopped Eskom making blanket cut-offs.
At the time, the courts told the government that it should take responsibility and find a solution to the problem of defaulting municipalities.
"This step on the part of Eskom is a result of the repeated failures by the municipality to adhere to its payment obligations to Eskom for the bulk supply of electricity. Eskom will continue to explore all available legal avenues to ensure that outstanding municipal debt is recovered," the company said on Wednesday.
Municipal debt is not inconsequential to Eskom’s financial situation. Eskom is in a tenuous financial position with debt of about R450bn, which it cannot service from revenue.
In 2019/2020, Eskom generated R33bn cash from operations, leaving it with a revenue shortfall of about R50bn a year in covering all costs. This gap is being covered in part by annual payments from the Treasury. A better municipal payment rate would make a significant difference to the revenue gap.
"The outstanding municipal debt of R30.9bn continues to threaten Eskom’s sustainability, and municipalities have a responsibility to fulfil their financial obligations for the bulk supply of electricity," said Eskom.
After Maluti a Phofung, the top five municipal defaulters are Emalahleni, which includes Witbank; Matjhabeng, which includes Welkom; Emfuleni in the Vaal; and Ngwathe, which includes Parys.
Since the start of the Ramaphosa administration, there has been profound laxity in the government in taking responsibility for municipal defaulting. Under the previous administration, an interministerial committee dealing with the matter was led by then co-operative government & traditional affairs minister Zweli Mkhize.
But present minister Nkosazana Dlamini-Zuma told members of parliament’s standing committee on public accounts in March that this was not her responsibility.
Municipal manager Futhuli Mothamaha said that the Maluti a Phofung council was in negotiations with Eskom.
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