The SA Local Government Association (Salga) has supported calls for the government to alleviate municipal debt to Eskom.
Salga, which represents municipalities, wants the government to match the percentage of Eskom debt it takes over with an equal percentage to alleviate the debt owed to the utility by municipalities in financial distress.
Salga’s call made in parliament on Friday follows President Cyril Ramaphosa’s recent suggestion to scrap Soweto’s R5bn debt to Eskom.
Municipalities owe Eskom more than R50bn and residents owe municipalities more than R140bn for services. In July, finance minister Enoch Godongwana reported that more than half the country’s 257 municipalities are bankrupt or insolvent and unable to pay creditors or service worker pensions.
Critics say a write-off of municipal debt will create a “moral hazard” and deepen the culture of nonpayment.
The Treasury has indicated that it will take over a third to two-thirds of Eskom’s debt of about R400bn with details being provided by Godongwana in his February 2023 budget.
Salga CFO Nceba Mqoqi told members of the two parliamentary appropriation committees in a briefing on the Division of Revenue Amendment Bill that Salga believed it would be appropriate if the Eskom debt takeover by the government includes the alleviation of some of the municipal debt to Eskom.
“There should be a reciprocal approach of alleviating the municipalities particularly those in financial distress. If there is a 10% alleviation of the debt burden similarly that 10% should also be extended to those municipalities. That will improve their solvency,” said Mqoqi.
The debt to Eskom had arisen from municipalities failing to collect amounts due for electricity by consumers in a depressed economy, he said.
“Debt can be written off, but there needs to be conditions ... discussions need to be entered into to [find a] balanced approach,” Ramaphosa said during a recent question-and-answer session in parliament. In 2020, Eskom wrote off about R8bn in overdue debt for Soweto residents.
Gauteng premier Panyaza Lesufi has also suggested that municipal debt to Eskom be written off, saying in a tweet: “Our argument remains. If Eskom debt is taken over by the central government, what our people owe Eskom in townships, informal settlements and hostels must also be scrapped. We need to reposition our townships, informal settlements and hostels so that they can be centres of growth.”
But Cosatu parliamentary co-ordinator Matthew Parks said he disagreed with Salga’s suggestion to provide debt relief to municipalities. “Eskom has been doing that. Municipalities have had constant debt agreements with Eskom and have continuously failed to honour those agreements.
“It can’t be correct that half of the country pays their electricity bills and the other half just simply choose to ignore it. Eskom’s debt level from municipalities is continually rising and it is forcing Eskom into a crisis where it now has to go for a 32% tariff hike because municipalities choose to play fast and loose with money that is often paid to it by consumers, by residents which municipalities choose to sit on and not hand over to Eskom.”
Parks said the solution to this crisis was for the entire country to move to prepaid electricity. “That is the only way we are going to close this chapter on the debt issue,” he said.
Salga reiterated its view that local government was underfunded relative to the services it has to provide. It also noted that the medium term budget policy statement did not provide measures “to address the risks or challenges experienced by municipalities in financial distress”.
It proposed that a portion of the higher-than-expected revenues be used to alleviate the financial pressures faced by these municipalities, with stringent conditions attached.
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