Municipal debt to Eskom increases by 5 billion

The debt due to Eskom by municipalities rose from R44.8 billion in March to R49.1 billion in July, according to Deputy President David Mabuza’s statement to Parliament.
Mabuza said that the National Electricity Crisis Committee was collaborating with municipalities and Eskom to decrease debt and assist councils with the commercial procurement of energy.
Even if Eskom recovered billions from local governments, it would likely be swallowed by increasing fuel prices and the 7% wage contract Eskom reached in July.
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In the four months leading up to July, the total debt owing to Eskom by municipalities increased by approximately R5 billion, according to Deputy President David Mabuza.

Thursday afternoon, Mabuza responded to questions in the National Council of Provinces. Members of Parliament (MPs) questioned the vice president on the National Energy Crisis Committee’s (NECC) progress in resolving the utility’s operational and financial difficulties.

In July, President Cyril Ramaphosa declared that the National Energy Crisis Committee will be established. The statement was made as part of his energy action plan, which includes a change in legislation allowing towns to independently acquire electricity.

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Mabuza said that the committee was collaborating with the Department of Public Enterprises, Eskom, and indebted municipalities to handle the debt owing to the municipality, while the entity addressed its massive debt of about R400 billion to financial institutions.

“The municipal debt due to Eskom poses a significant threat to the entity’s financial survival. Since March to July 2022, municipalities’ debt to Eskom has increased from R44.8 billion to R49.1 billion. This is not an ideal situation for Eskom and municipalities,” Mabuza added.

Mabuza said that the committee continues to assist Eskom in enhancing revenue collection and entering into service-level agreements with municipalities, notably the Maluti-A-Phofung local council in the Free State, which owes R6.5 billion to Eskom.

Efforts are being made to expedite municipalities’ acquisition of electricity from commercial entities.

“A municipality might issue an invitation for investors to participate in electricity generating to satisfy the demands of customers. Currently, several towns are through this procedure. We believe that this would relieve pressure on Eskom and increase competitiveness,” he said.

Mabuza noted that while effective municipal debt collection will assist Eskom in reaching its savings objective of R61,8 billion by 2023, these savings would not inevitably lower energy rate rises. Instead, they would assist Eskom in absorbing the rise in fuel prices and labour expenditures, as stated by Mabuza.

“As part of internal cost efficiency and equitable requirements, Eskom has set a cost savings goal of R21.4 billion for the 2023 fiscal year, and a total R61.8 billion for the 2020-2023 medium-term.

In July, Eskom and unions agreed to a 7% salary raise for all employees, despite the entity’s original offer of a 0% wage increase during discussions.

Andrew Arnolds, a member of the EFF parliament, posed a follow-up question to Mabuza: “Why are further conferences being held instead of resolving the energy crisis?” Is this committee not an accountability scapegoat?”

“I disagree that the committee is a scapegoat,” Mabuza said. This is the importance we assign to the task. We are treating the situation as a crisis and have reacted accordingly. It implies that particular rules, processes, and structures must be streamlined in order to attain the intended outcomes.”

Mabuza said that the energy crisis committee was striving to accelerate South Africa’s attempts to build power capacity by shortening the time of procedures such as environmental impact assessments.