Government working to resolve municipal debt owed to Eskom - Deputy President

Friday, March 24, 2023

Deputy President Paul Mashatile says government and Eskom are working together to resolve the “inherent risk” that municipal Eskom debt has on the stability of the power utility and the economy.

The Deputy President was speaking during his maiden Question and Answer session in the National Assembly on Thursday afternoon.

By the end of December last year, municipalities owed Eskom some R56.3 billion for unpaid bulk electricity supply – a number that Deputy President Mashatile said is growing.

“The debt is rising. It is clear that we need a debt relief strategy that will acknowledge the inherent risk of unviable municipalities. In this regard, Eskom will provide incentivised relief to municipalities whose debt it unaffordable,” he said.

Deputy President Mashatile said the relief will come with conditions that municipalities are bound to adhere to in an assurance that “there will be no repeat of debt build up over time”.

“Some of the conditions will include, the installation of prepaid meters to correct the underlying behaviour of non-payment and operational practises in the affected municipalities.

“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. In addition, the NT is preparing a Municipal Finance Management Act (MFMA) circular dealing with the relief strategy regarding municipal debt owed to Eskom which is expected to be released later this month.

“The culture of non-payment – not only by municipalities – by all organs of state, individual households and customers is concerning. We cannot overemphasise the need to discourage a culture of non-payment for public services,” he said.

The Deputy President emphasised that changes made on new generation capacity will also allow municipalities to independently procure power in order to provide electricity for businesses and households and generate additional revenue.

Eskom’s financial challenges

Deputy President Mashatile added that this poses significant financial challenges for Eskom which have to be addressed.

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

“The debt relief of R243 billion will be implemented over the next three years. Government’s intervention of explicitly taking on this debt is aimed at reducing fiscal risks and enhancing long term fiscal sustainability,” he said.

The Deputy President said R184 billion of the relief will go to servicing the power utility’s debts, up to R70 billion will go to taking over some of Eskom’s loan portfolio in the 2025/26 financial year.

“This will allow Eskom to focus on its operating cash flow, on much needed maintenance and capital expenditure while at the same time, reducing Eskom’s debt of R168 billion.

“Further to this work, the government is continuing with the medium to long term plans of adding additional capacity to the grid. We are committed to clean energy solutions including investing in renewable energy solutions.

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