Oletha Hagile and Yandisa HAgile from Mfuleni studying using a candle after Eskom stage 3 load sheeding. Photographer Ayanda Ndamane/African News Agency (ANA)
Oletha Hagile and Yandisa HAgile from Mfuleni studying using a candle after Eskom stage 3 load sheeding. Photographer Ayanda Ndamane/African News Agency (ANA)

Eskom has no choice but to recoup spiralling municipal debt

By Dineo Faku Time of article published Oct 9, 2020

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JOHANNESBURG - Eskom chief executive Andre de Ruyter said yesterday that the arrears debt by municipalities had spiralled to R31.4 billion at the end of August.

Speaking to delegates of the virtual 2020 Joburg Indaba De Ruyter said that municipal debt was an undisputed threat to Eskom’s financial sustainability and the entity had no choice, but to recoup the debt.

“We simply don’t have any other choice but to take action against the municipal debt. It gives us no pleasure to accelerate the debt recovery process to attach debt accounts, seize assets belonging to defaulting municipalities.

“But it has had to become part of our intensified efforts to collect this unpaid debt. There are no winners. The ratepayers and municipal customers are the losers, and that is not where we would like to be,” said De Ruyter.

At the end of May, municipalities owed Eskom R30bn in arrears debt payments.

Eskom faces a staggering debt burden of R488bn, with an unsustainable interest bill that requires the group to borrow money to pay interest.

“While the equity assistance from the National Treasury continues to be an indispensable source of support for Eskom, it is clear that a structural solution must be found, and we are encouraged by the positive progress made at the National Economic Development and Labour Council in this regard,” said De Ruyter.

De Ruyter said that the group’s revenue had declined as a result of lower sales volumes and non-cost-reflective tariff increases granted by the National Energy Regulator of South Africa (Nersa), adding pressure to the group’s income statement.

“Without cost-reflective tariff, our business efficiency efforts will only be of a short-term benefit. Eskom has, thus, reviewed various revenue decisions by Nersa through the high court,” said De Ruyter.

On Wednesday the Nersa won their leave to appeal on the misappropriation of R69bn of government equity of three R23bn a year tranches. The court had originally ruled that Nersa had illegally deducted R69bn from Eskom’s allowable revenue for 2019/20 to 2021/22.

De Ruyter said that the court action was a measure of last resort.

“Eskom does not want to be in court with its regulator, and looks forward to the appropriate legislative changes to allow for a less adversarial approach to resolving our differences,” said De Ruyter. He said the group had also made efforts to reverse the rot of corruption through the issuing of summonses against 12 defendants, including former Eskom employees and board members associated with state capture. “This is another example of steps we are taking to rebuild trust amongst our employees and customers and confidence in Eskom. We will continue to pursue those who have sought to enrich themselves at the expense of Eskom, and are about to step up our legal processes to deliver these outcomes,” De Ruyter said.

He conceded that Eskom had contributed to the lag in the South African economy. “We have had load shedding for 13 years. We have been a drag in economic growth in South Africa. It is clear without a reliable electricity supply there cannot be an economic recovery,” he said.

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