March and August fast approach: Eskom anticipated that by March, municipal debt to the utility would balloon to R100bn and two key water boards face bankruptcy by August if municipal debt to them is not addressed.
The presidency heading up the overhaul of local government and the country’s ailing metros is a good idea, but the pace of reform has to be accelerated and targeted at these potential flashpoints to make a real difference.
In his opening of parliament address after the 2024 election last year, President Cyril Ramaphosa said the team in the presidency driving reform under the Operation Vulindlela banner would extend its scope to include local government and the delivery of basic services.
Ramaphosa’s upcoming state of the nation address should add meat to the bones of this much-needed plan, but any reform at the local level has to target the flashpoints that could potentially place the entire country at risk.
These flashpoints are the spiralling debt by municipalities to Eskom and water boards. Municipal debt poses a stark risk to Eskom’s financial stability.
The utility is owed about R90bn by the country’s metros and municipalities. Eskom told parliament last year that it expected municipal debt to grow to R100bn by next month, and at this rate would swell to R200bn by 2028.
What’s more, in the five months from April to August last year Eskom’s municipal debt grew by R11bn and almost half of that debt, R5bn, came from the country’s large metros.
Eskom warned that if this situation was not addressed it would need another bailout from the National Treasury. It said the debt relief Eskom received from the national government to stabilise its books could be nullified by municipalities failing to honour their payments.
The country’s central economic hub, the City of Johannesburg, is among the culprits failing to pay Eskom on time. The city owes Eskom R4.9bn and was threatened with power cuts in November over its failure to honour a commitment to make payment on time. Electricity minister Kgosientso Ramokgopa was forced to intervene in the row.
The failure of municipalities to properly manage their finances extends to another crucial delivery point: water. Their failure to pay for water is placing water boards at risk. Municipal debt to water boards increased by a whopping 151% in 2019-24, increasing to R22.36bn.
As a direct result, Vaal Central Water and Magalies Water face bankruptcy by August.
Municipal debt in these two critical areas of delivery not only jeopardises the sustainability of Eskom and the country’s water boards but the national fiscus too.
It is a growing crisis that must be addressed with speed.
In the coming months there will be a flurry of activity from municipalities across the country as they gear up for the next electoral showdown, the local government elections next year. They will begin their five-yearly pothole patching, verge trimming and garbage clearing.
South Africans should not be fooled — municipalities are placing the provision of crucial services such as power and water at risk with their failures due either to incompetence, corruption or both.
Ramaphosa’s Operation Vulindlela must come up with a plan to address this brewing crisis, and fast.
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