Mashatile announces relief strategy for municipalities’ debt to Eskom

Deputy President Paul Mashatile. Ayanda Ndamane / African News Agency (ANA)

Deputy President Paul Mashatile. Ayanda Ndamane / African News Agency (ANA)

Published Mar 24, 2023

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The National Treasury is preparing a Municipal Finance Management Act (MFMA) Circular dealing with the relief strategy regarding more than R50 billion debt owed to Eskom by municipalities.

This was announced by Deputy President Paul Mashatile yesterday in Parliament during his maiden oral questions session in the National Assembly.

This government intervention was first announced by Finance Minister Enoch Godongwana in his Budget Speech last month when he said Eskom would provide incentivised relief to municipalities whose debt was unaffordable.

Mashatile said the MFMA Circular was expected to be released later this month, with implementation expected to start on April 1.

“Under the National Treasury, the Multidisciplinary Revenue Committee (MdRC) is continuing with its main task of ensuring that all municipal debts are co-ordinated, tracked and resolved on an ongoing basis,” Mashatile said.

“In this regard, accounting officers are required to settle all contractual obligations, and pay all monies owed, including intergovernmental claims, within 30 days of the submission of an invoice, or on a specific period agreed with creditors or suppliers.”

Mashatile told MPs that this was the government’s way of providing a sustainable solution to this crisis of municipal debt. However, there will be conditions.

As of the end of December 2022, municipalities owed Eskom R56.3bn and the debt is rising.

“It is clear that we need a debt-relief strategy that will acknowledge the inherent risk of unviable municipalities,” Mashatile said.

“In this regard, Eskom will provide incentivised relief to municipalities whose debt is unaffordable. However, the relief will come with conditions that will ensure that there is no repeat of debt build-up over time.”

Mashatile said the conditions would include the installation of prepaid meters, to correct the underlying behaviour of non-payment and operational practices in the affected municipalities.

He said the municipalities must use the money they are allocated effectively and efficiently for the intended purposes.

“If this is not the case, there should be consequences,” Mashatile said.

He said the culture of non-payment, not only by municipalities, but by all organs of state and individual household customers, was concerning.

“We cannot over-emphasise the need to encourage a culture of non-payment for public services,” Mashatile said.

“In addressing the utility’s financial challenges, the government has announced further measures on Eskom.”

Last month, Godongwana announced a debt relief of R243bn for Eskom over the next three years in a bid to reduce fiscal risk and enhancing long-term fiscal sustainability.

This debt relief consists of two components: first Eskom’s debt service requirements of R184bn, representing Eskom’s full debt settlement requirement in three tranches over the medium term.

Second is a direct take-over of up to R70bn of Eskom’s loan portfolio in 2025/26.

This will allow Eskom to focus its operating cash flow on much-needed maintenance and capital expenditure while at the same time reducing Eskom’s debt by R168bn.

“It is our hope as a government that all these measures will facilitate and chart the way towards energy security, resulting in inclusive economic growth and job creation,” Mashatile said.

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