Eskom steps in to manage distribution in three provinces’ councils

Eskom has moved to manage electricity distribution at several local government councils in three provinces in an intervention hailed as financial salvation by the utility but decried by union leaders as a threat to the autonomy of local government.

At a press conference on Monday, energy & electricity minister Kgosientsho Ramokgopa said the municipalities that had signed up to the so-called distribution agency agreements were in Limpopo, the Free State and Mpumalanga.

With municipal debt soaring past R100bn and Eskom warning that it risked rolling back gains made in the past few years to fix its lopsided capital structure and is delaying the break-up of the utility, Ramokgopa has been championing the initiative to oversee billing and collection.

Still, the initiatives face strong opposition from the Independent Municipal and Allied Trade Union (Imatu), which says the stopgap measure potentially hollows out local government governance and raises questions about the legality of the processes followed.

Ramokgopa’s announcement comes after the recent plea by Eskom CEO Dan Marokane that the Treasury make the agreements mandatory for municipalities drowning in unpaid electricity bills. Municipalities owe Eskom a staggering R109bn, an 18-fold surge since 2015 when the figure stood at just under R5bn and contributing to the financial crisis that compelled the Treasury to step in with a R254bn relief package in 2023.

Still, the bailout came with strings attached: local governments were expected to settle their accounts under a municipal debt relief programme, which was overseen by the Treasury and has all but failed, with some councils treating it as what Eskom calls a “payment holiday” rather than a structured financial recovery plan.

The Treasury told Business Day that by end-February, 60 of the 71 participants had received warning letters due to noncompliance with the conditions. Only 14 municipalities have so far had the third tranche of debt written off — a total of R3.5bn. Failure to meet the programme’s conditions puts such municipalities at risk of losing their distribution licences. This provision has not yet been enforced.

Eskom takes what belongs to it, the rest is given to municipalities... By the time we leave, municipalities have got sufficient capacity to be able to collect on their own.

—  Kgosientsho Ramokgopa, energy & electricity minister

Ramokgopa called ballooning municipal debt an “existential threat” to the power utility and Marokane echoed the urgency, warning that unless it was curbed, it would wipe out the R254bn debt relief provided by the government. The relief package stretches over three years to end-March 2026.

Eskom board chair Mteto Nyati warned in January that the mounting municipal debt might delay the unbundling of the distribution business and put its viability at risk.

At Eskom’s briefing about preparations for winter, Ramokgopa was at pains to explain Eskom would not be taking over the distribution licences of municipalities but would merely support them for three to five years.

“It is working with them. Helping them with value chain, help to capacitate them, do the planning, investment in infrastructure, collection, credit control — as well as ensuring correct billing and co-management of accounts,” Ramokgopa said. “Eskom takes what belongs to it, the rest is given to municipalities... By the time we leave, municipalities have sufficient capacity to be able to collect on their own.”

He had met with the premiers, MECs and mayors of the three provinces and they all agreed to the plan, Ramokgopa said. It now only remained for Eskom to get the agreements formally signed.

However, these agreements have caused controversy, with Imatu earlier rejecting them as usurping the governance integrity of local government and the Eskom plan, and threatened to go to court to stop it.

“This is not a solution, it’s a distraction,” said general secretary Johan Koen.

“The real issue is the broken funding model that leaves municipalities underresourced and overburdened. Stripping them of core functions such as electricity will only deepen the crisis. Handing over municipal electricity infrastructure to Eskom, a utility already battling to fulfil its own mandate, risks creating more instability, not less,” Koen said.

Chris Bosch, CEO of Rural Maintenance, which has been successfully managing the electricity function of the Mafube municipality in the Free State as an agent for the municipality for more than a decade, said it was not that simple to conclude such an agency agreement.

The Municipal Finance Management Act required council approval, competitive bidding for contracts and public comment, with extra requirements for agreements over three years.

Meanwhile, thanks to improved plant performance and additional capacity added to the grid, Eskom said it was able to reduce the unplanned outages assumption in the base case for the winter forecast by 2,000MW to 13,000MW.

If that pans out, there will be no load-shedding this winter. If the unplanned outages increase to 14,000MW, no load-shedding is expected until end-August either, which is as far as the forecast looks into the future.

Even if 15,000MW were unavailable due to sudden breakdowns, Eskom expects only 13 days of load-shedding, limited to stage 1.