Fewer than half of the 31 municipalities that have payment arrangements with Eskom are fulfilling their commitments to settle outstanding accounts, according to finance minister Enoch Godongwana.
Just nine municipalities are up to date with payments while another five have made only partial payments, Godongwana said in a written reply on Tuesday to a question by EFF MP in the National Council of Provinces, Andrew Arnolds.
Eskom is saddled with debt of about R400bn and needs regular bailouts from the government to keep operating. In addition, it lacks finance to expand or replace its ageing infrastructure and its dire state has led economists to describe the state-owned utility as the biggest single threat to the economy.
Many municipalities enter into a arrangements without considering whether they can afford the payments and end up defaulting, Godongwana said in his reply.
“In essence, municipalities enter into the payment arrangements to avoid being disconnected by Eskom even though their financial status did not allow the arrangement,” he said.
“National Treasury’s analysis and observation is that many of these municipalities owing Eskom are in financial and service delivery crisis. Some of them have adopted unfunded budgets which is suggestive that they intend spending more than their revenue intake. Additionally, this group of municipalities are plagued with inefficiencies in the revenue value chain that contribute to their dire position,” he added.
These inefficiencies, he said, could range from adopting tariffs that are not cost reflective and do not cover the bulk cost charges, to huge losses on the services for which no revenue is recovered.
Earlier this month Deputy President David Mabuza told MPs that municipalities’ debt to Eskom had risen to R49bn by the end of July, an increase of almost 10% since March.
Eskom, meanwhile, is considering disconnecting the power supply to the City of Tshwane in a bid to force the metro to settle more than R1.6bn that was due on August 17.
The city paid only R68m towards the outstanding amount, which “did little to dent the huge outstanding balance on its electricity account”, Eskom said in a statement.
The company said it had numerous talks with the city’s management “but these actions have not yielded any results”.
“The inconsistent payments are both untenable and unacceptable since Eskom’s financial position is well known. [Tshwane’s] persistent failure to honour its payments places a huge burden on Eskom to continue providing it with electricity,” said Daphne Mokwena, the senior manager for customer services.
Peter Sutton, Tshwane’s member of the mayoral council for finance said the metro “notes Eskom’s media statement and intends to ensure current account is serviced”.
The finance team has been in talks with Eskom on a payment plan and their understanding is that the amount owed was only four days in arrears and related only to July with all other prior debt paid, Sutton said in a statement
“The City of Tshwane remains committed to paying what we owe and ensuring we service our Eskom accounts. This is why we embarked on our aggressive revenue collection campaign to ensure that we collect enough revenue to service our creditors like Eskom,” he said.
Update: August 23 2022
This story has been updated with new information throughout
ensorl@businesslive.co.za
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