Join Moneyweb Editor Ryk van Niekerk, economists Dr Iraj Abedian and Isaah Mhlanga and tax practitioner Yolandi Esterhuizen on Thursday, February 25 at 11h00 in a free webinar analysing the budget. Registration is essential.

Court rulings throw spanner into Eskom’s municipal debt collection works

Government to sort out internal disputes first, before prejudicing end-users.
Image: Bloomberg

Two recent court rulings have made it much more difficult for Eskom to leave paying municipal customers in the dark when cutting or restricting electricity supply to delinquent municipalities.

While this will hinder Eskom’s efforts to collect more than R30 billion in outstanding municipal arrears, it also calls to action other state institutions obliged to assist in resolving disputes between Eskom and local governments.

Moneyweb Insider INSIDERGOLD

Subscribe for full access to all our share and unit trust data tools, our award-winning articles, and support quality journalism in the process.

Choose an option:

R63 per month
R630 per year SAVE R126

You will be redirected to a checkout page.
To view all features and options, click here.

A monthly subscription is charged pro rata, based on the day of purchase. This is non-refundable and includes a R5 once-off sign-up fee.
A yearly subscription is refundable within 14 days of purchase and includes a 365-day membership.

Click here for more information.

These include provincial departments, National Treasury and energy regulator Nersa.

The first judgement, delivered by the Supreme Court of Appeal (SCA) in the last days of 2020, dealt with applications by property group Resilient and business and tourism chambers in Sabie, Graskop and Lydenburg. They were fighting plans by Eskom to disconnect the eMalahleni and Thaba Chweu municipalities, both in Mpumalanga.

Sakeliga, part of the Solidariteit movement, joined the application as friend of the court.

The SCA found that it would be unlawful for Eskom to disconnect electricity supply to the municipalities, without first exhausting the mechanisms provided for resolving disputes between government entities provided for in the Intergovernmental Relations Framework (IRF) Act .

This vindicates the argument forwarded by Sakeliga.

The SCA found that municipal service delivery will completely collapse if Eskom cut electricity supply to the municipalities, because water and sanitation services are underpinned by electricity supply.

Eskom cannot ignore this, because as a state-owned company it has a constitutional duty to promote constitutional rights and assist and support municipalities to provide basic services.

Eskom failed to use the mechanisms provided for in the IRF Act and to lodge the disputes with National Treasury for mediation as it was legally obliged to do.

The SCA criticised Nersa, the national minister of cooperative governance, and her provincial counterpart for failing to intervene in the matters for years.

Eskom’s plan to cut electricity supply was also irrational, since it was aimed at collecting arrear debt and limiting the rate at which it was escalating, while acknowledging that the municipalities are simply not in a position to pay, the SCA found.

It pointed out that in both cases the debt accumulated over more than a decade and it was unrealistic to expect the municipalities to pay this in full in a short period.

Advocate Werner Zybrands, a municipal expert, pointed out that the court did not provide any timeframe for the intergovernmental dispute resolution.

He said he is unaware of any instance where these mechanisms were used where several municipalities, a state-owned company and provincial and national government were involved. “I expect Stalingrad (delaying) tactics, well-known within the ANC, to be deployed to the full,” Zybrands said.

He said even if the parties could come to an agreement, the implementation could take decades.

Second case

In the second case, decided in the Free State High Court early in January, the court followed the ruling in the Resilient case, but went further by giving Eskom and the Nketoana municipality six months for intergovernmental dispute resolution.

Nketoana is based in Reitz in the Free State and distributes electricity to Reitz, Petrus Steyn, Ntha and Lindley.

This might be a tall order, since the two parties have been unable to settle their dispute since 2016.

The ruling shows that Nketoana’s Eskom bill was in order until some time in 2013. Due to the conduct of “unscrupulous or corrupt” officials this changed and the municipality now owes Eskom more than R300 million.

That is according to Eskom.

Nketoana acknowledges that its account is in arrears. It told the court it is prepared to pay its dues, but disputes the amount. According to Nketoana, Eskom also owes it amounts related to the areas within its jurisdiction where Eskom distributes electricity directly to end-users.

These amounts, it argues, should be offset against its own outstanding amounts and will result in a much lower net debt.

Eskom has already credited Nketoana with R1.7 million on the basis of its claims, but the municipality maintains there is more outstanding.

Nketoana succeeded with its application for an interim order to stop Eskom’s plans to restrict electricity supply to the municipality until it has had an opportunity to debate the bill with Eskom.

Eskom has provided it with agreements, invoices and other documents upon which its claim is based, but the municipality says it does not have the expertise to properly assess the bill that covers several years.

It wants the opportunity to appoint experts to do a proper audit.

The court also found that Eskom’s plans were irrational, due to Nketoana’s inability to pay the bill and unreasonable due to the hardship it will impose on the residents.

Should Eskom proceed to disconnect the electricity supply without first exhausting the intergovernmental dispute resolution mechanisms, it would boil down to self-help, which is in conflict with the rule of law, the court found.

National Treasury’s problem

Piet le Roux, CEO of Sakeliga, welcomed the two rulings. He said the Nketoana ruling clearly directed the parties to submit their dispute to National Treasury. That means that the onus shifts to National Treasury to find a solution. “If that does not happen, National Treasury must be held accountable. We will keep a close eye on this matter,” he said.

Zybrands says the critical question is where the money will come from. Eskom needs it now. “In actual fact it means that the debt of all the bankrupt, dysfunctional municipalities will have to be paid by National Treasury,” he says.

COMMENTS   25

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

On the topic of Eskom, strange that there is no load-shedding due to “wet coal” the past week (…since Mpumalanga was soaked the past few days by rain).

@MichaelfromKlerksdorp Hahaha nice one. As a side-note, it would be interesting to see how the municipalities involved in these court cases allocated their budget. With the last auditor general report Mpumalanga and the Free State had many unqualified audits. For my own curiosity I would like to know what percentage of their budget is used for salaries?

Most of the income is used for salaries.

When I was last involved with municipal officials, Molteno was using 65% of income for salaries. that was 8 years ago……

75 % salaries
20 % theft
5 % roads / parks / libraries / swimming pools etc

#Salary, let’s remember there is a Job related salary & a political party induced entitlement “salary” which includes numerous “perks” not available to non party members.

Little economic activity?

The problems we face today are there because the people who work for a living are now outnumbered by those who vote for a living

That comment does not match your username, but it does make you think.

End-users (only the ones that pay for the electric) are getting predudiced by Govt not sorting its issues out.

Good point. Perhaps they have issued umbrellas?

@Mandinean Hoekom? Gaan dit klappe reën?

We must remember who appoints the SCA and who the Chief Justice is…

So we have to rely on the courts again to govern because the elected government struggles to govern? Its a SOE vs municipalities. Business needs eskom and eskom needs municipalities to pay but they can’t because of incompetence corruption and slow economic times. So if eskom can’t survive, businesses will struggle and municipalities will struggle even more. How will this end? IMF? Zimbabwe? Does anc government even care? Looking at evidence before the Zondo commission it certainly doesn’t look like it.

Sadly , South Africa seems to circle the drain. Failed is to gentle a word to describe the monumental , general ANC mess.

Highlights why South Africa is un-investable. In the not too distant future electricity and potable water will be a memory, and the ANC will be looking for the can in a pothole. The constitutional court will rule that they should go to treasury and ask for funds to put out a tender for a new can.

Disconnected eMalahleni (Witbank)? That’s a huge town to disconnect (with a fair share of affluent people). How bad must the finances and mismanagement be?

To sum it all up – the court has found that the ANC is not ready to govern. The ANC has full control over every incidence of failure at the municipalities, Eskom and Nersa. The ANC is the one common denominator in this cesspit of corruption, incompetence and bankruptcy. The court has found that the ANC is guilty of gross negligence, the willful dereliction of duty and even sabotage. Honestly, the court should just go ahead and ban this organisation in the national interest. The court has found that the Freedom Charter is a farce and that they reduced the constitution to a piece of crumpled paper lying on the floor in a toilet in Luthuli House.

Sad but true. And while SA inc are sinking, the comrades in charge are fighting over what’s left like hyena dogs. Only today is important- tomorrow can look after itself! This don’t sound human?

Treasury needs to pay Eskom directly the estimated forward bills of councils and deduct that from the central allocations. It must be quite simple to estimate for anybody what their next quarter bill would be and then adjust that as a rolling balance based on actual bills.

The historical arrears are going to be tougher and that is where Eskom should seize and liquidate assets. It is utter nonsense that councils sit with thousands of unproductive land assets that could be sold and thereby also start generating rates and taxes for the councils.

I agree. In essence, what you are suggesting is that Treasury treats ANC municipalities, the ANC actually, like a parent would treat a grownup with a heroin habit. Deduct the alimony from the addict’s distribution from the trust fund and pay it over to his estranged wife directly.

The ANC is non compos mentis, but the voters gave them the responsibility to look after 60 million citizens. What does that say about the voter when they elect a heroin addict into office?

Basically yes, in the interest of the children (paying consumers) of the addicts I don’t see another way working for the kids. Giving the parents more cocaine will achieve what?

If Eskom were able to offer direct supply to individuals who pay (via pre-paid meters for example) they can eventually cut off all the non-payers. No?

The councils own distribution and billing within their areas. That’s why they need 3 times as many staff at that nondescript last week non salary paying council with R550k per year average salary :/

I wonder if any DA run municipality has the same problem where they cannot pay to Eskom what is their due?

Identical. In most cases the DA inherited a corrupt workforce. Cape Town must have the most expensive electricity in the country. Knysna had / has a huge problem with its DA run municipality that had a very corrupt mayor … they too have problems with Eskom.

No one talks about electricity theft. In the Princess squatter camp (Main Reef road, Roodeport, just behind the Princess shopping center) has drive by you can see the shiny new wire running from the electrical posts across the road to trees in the squatter camp. The COJ every six months shows up and removes the illegal connections – but never in winter. Two weeks later its up again.

We need a new model to combat this problem.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / PODCASTS SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us:

Search Articles: Advanced Search
Click a Company: