Eskom has proposed taking over debt laden municipalities as it proposes employing a different approach in recouping around R36 billion in debt arrears that continue to weigh down on its balance sheet. Photo: Bloomberg
Eskom has proposed taking over debt laden municipalities as it proposes employing a different approach in recouping around R36 billion in debt arrears that continue to weigh down on its balance sheet. Photo: Bloomberg

Eskom is getting ready to take over defaulting municipalities

By Siphelele Dludla Time of article published Feb 16, 2021

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JOHANNESBURG - ESKOM has proposed taking over debt laden municipalities as it proposes employing a different approach in recouping around R36 billion in debt arrears that continue to weigh down on its balance sheet.

Chief executive Andre de Ruyter yesterday said the utility was piloting an “active partnering” model where it would over the running of struggling municipalities, like it did with Malutia-Phofung Local Municipality in the Free State.

De Ruyter said non-paying municipalities were a “major problem” to Eskom's financial sustainability, adding that 70 percent of the arrears debt was owed only by 10 councils.

He said that Eskom had applied a variety of measures to recoup the debt, including the so-called nominated maximum demand and attaching bank accounts and movable assets, but all these efforts had come to nought.

“We are implementing something that we call active partnering. We have tried many levers to persuade municipalities to pay,” De Ruyter said.

“But the model that we think is going to work best is something that we are currently trialing with Malutia-Phofung.”

In July last year, Eskom attached the bank account of Maluti-a-Phofung following a court order granted in 2018 as of its revenue recovery strategy.

Eskom said this was a result of the repeated failures by the municipality to adhere to its payment obligations for the bulk supply of electricity.

De Ruyter said Eskom would step in and acts as the agent for the municipality by maintaining the infrastructure such as substations while assisting

with billing and false prepaid metres.

Eskom would also collect revenue on behalf of the municipality and then pays it to its bank account.

“With that part of the revenue into Eskom's bank account we can assure that the current account is serviced on a regular basis,” De Ruyter said.

“And if you prevent further build up of incremental municipal debt, that's a very good start towards addressing the debt problem.

“So we certainly think that this active partnering concept is far more a constructive and an appropriate way

of engaging with our customers and ensuring that we get paid, and that service delivery can be addressed.”

De Ruyter said there was still a substantial ramp of legacy debt that needed to be addressed.

He said building a financially self-sustainable Eskom was part of his top three priorities.

Though Eskom's staff costs had come down after 2 000 workers left the power utility last year, De Ruyter said the debt burden was still at unsustainable levels.

“We are currently labouring under

an unsustainable net debt burden that varies between R460bn to R485bn, depending on the exchange rate,” he said.

De Ruyter also said that Eskom was not opposed to self-generation for domestic purposes without a license.

President Cyril Ramaphosa last week said the government will begin amending the law to allow for self-generation of between 1MW and 50MW to ease the burden on Eskom.

“There is a narrative that Eskom is opposed to rooftop solar generation, that's not true,” De Ruyter said.

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