Municipalities that owe Eskom millions, and in some cases billions, of rand are struggling to stick to the conditions set by the National Treasury as part of a debt relief programme.
Nhlanhla Ngidi, head of energy and electricity distribution at the SA Local Government Association (Salga), said Salga, municipalities and government departments have for years been looking for solutions to municipalities’ ballooning debt to Eskom.
Municipalities purchase electricity from Eskom and resell it to customers at a premium to help fund their budgets. However, the failure of municipalities to keep up to date with their Eskom accounts has seen their debt rise from about R20bn in 2018 to R75bn at the end of February.
Business Day previously reported that of the 248 municipalities supplied by Eskom, 135 had overdue debt (including 36 that owe less than R1m) as at February 29.
In an effort to address this, the Treasury launched the municipal debt relief programme last year. It allows municipalities to have their Eskom debt written off systematically over three years. However, to qualify municipalities have to comply with 14 conditions, including keeping up with current account payments to Eskom.
If a municipality’s application is approved, a third of the total owed will be written off for each of the three years of the debt relief.
It was “worrisome”, said Ngidi during an interview on Wednesday, that many of the municipalities that qualified to participate in the programme were “at risk of dropping off” because they could not meet all the conditions set by the Treasury.
According to the Treasury, it received 72 debt relief applications, of which 71 were approved. While it has not yet terminated any municipality’s participation, so far 30 municipalities had complied moderately (60%-75%) with all 14 conditions and 41 had complied poorly (below 60%).
The conditions include that municipalities have to maintain their current Eskom account and they would be expected to progressively install smart prepaid meters.
“The conditions are not impossible, but I think the manner in which things have regressed in some municipalities makes it difficult for them to do all the things that Treasury is expecting of them in this short time,” said Ngidi.
Failure to pay
For municipalities to be able to keep up with their current Eskom accounts they would first need to address the losses arising from their own customers’ failure to pay. Rising tariffs and poor debt collection have caused a consumer culture of nonpayment, which has compounded the problem for municipalities.
“People don’t want to pay [their bills], we have this bad culture in which people don’t understand the consequences of not paying. The money is not coming in,” he said.
The City of Tshwane, which owes Eskom about R3bn, was collecting only about 60% of what it sold, according to Ngidi.
“Some of these conditions [as set by Treasury] will take time to implement, and one of the main reasons why municipalities are dropping off is because they have not been given enough time.”
The installation of smart meters, he said, would require tendering and rollout processes, which could take 12 to 18 months.
“Treasury must look at the reality of these municipalities. They cannot implement at the speed Treasury is expecting of them. Now they have to drop out of this programme because there is not proper allowance for the real situation on the ground,” said Ngidi.
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