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‘Eskom owes us R4.8bn’ claims beleaguered municipality

After handing over 139 farms as security for its own arrear debt.
The municipality wants Eskom to explain how it gets to the amount it claims is due. Image: Waldo Swiegers, Bloomberg

The Matjhabeng municipality in Welkom, which recently gave 139 farms to Eskom as security for R3.4 billion outstanding debt, is now threatening to sue the power utility for an even bigger amount.

It has asked National Treasury to mediate in the intergovernmental dispute between the two entities, but says in its letter that Eskom seems to prefer “the legal route”.

Moneyweb earlier reported that Eskom attached the municipality’s bank account following a court order on September 4. This was aimed at collecting R3.4 billion arrear debt Eskom claims from Matjhabeng for bulk electricity purchases.

Read: Eskom gets tough with errant municipalities, grabs cash and land

A week later the two parties were back in court to make an agreement between them a court order. In terms of the agreement Matjhabeng regained control over its own bank account. It however gave as security to Eskom 139 farms it owns, valued at R2.5 billion.

The farms remain the property of the municipality, but it will register bonds in favour of Eskom and be precluded from selling the farms until the dispute between the two parties has been resolved, Eskom said in a statement.

Not a new issue

Eskom said it has been in a legal battle with Matjhabeng since 2014 when its outstanding debt amounted to R372 million.

The municipality is however disputing its current outstanding balance of R3.4 billion and wants to have all the detail to understand how Eskom arrives at that number.

According to Matjhabeng’s attorney Bertus Maritz from Bokwa Law Incorporated, Eskom has been ignoring repeated requests for such information.

He has since written to Eskom to give it one last opportunity to supply it with the information, failing which it will go to court once again.

In the letter that Moneyweb has seen, Matjhabeng also threatens to issue summons against Eskom for the damages it has suffered due to Eskom’s distribution of electricity in the municipality’s area of jurisdiction.

This he calculates at 20% of Eskom’s electricity sales to mines, farms and other clients within the municipal borders to the value of R1.32 billion and a further R3.65 billion the municipality has lost because it does not have access to electricity disconnections as a debt collection mechanism in Eskom distribution areas.

Eskom did not respond, Maritz says.

A plea to Treasury

He then wrote to National Treasury hoping to sort the matter out without going to court. On the eve on the October 8 deadline, he had not had any response from National Treasury either.

The letter refers to “Eskom’s failure to act bona fide and conduct itself in an open and professional manner in order to promptly address issues between two organs of state”.

The municipality claims that Eskom is infringing on the constitutional mandate of municipalities to distribute electricity, which it claims is exclusive, and trumps the distribution licence issued to Eskom by energy regulator Nersa.

Read: Municipalities want a piece of Eskom’s distribution pie

It states that Eskom refuses to sign a service level agreement with the municipality, which is a legislative requirement and deprives the municipality of the opportunity to earn revenue from electricity sales in 26 of its 36 wards.

It acknowledges Eskom’s argument that the municipality finds itself in financial difficulties due to its failure to act against arrear debtors, but says it is impossible to issue summons to 30 000 consumers very month. Apart from the fact that there are not enough attorneys to do that, half of the local population is unemployed and such action would result in unrest, the municipality argues.

According to Matjhabeng other municipalities are in the same position and it is important to resolve the principles at national level.

In July arrear municipal debt to Eskom amounted to R31 billion.

Read:

Municipal manager gets 48% increase during lockdown

Emfuleni and Midvaal enter the record books, but for very different reasons

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The issues of municipalities owing ever growing and unsustainable amounts of money to SOEs like Eskom is of the ANCs and National Level’s making.

You cannot run countries and expect the the growth engines of the economy, the municipalities, to be functional when 95% cannot produce a clean audit and do not collect debt or can’t stop theft of electricity.

The ANC is the common problem in all this.

You can and must solve it through the courts.

What will be interesting if they publish.
1. Salary expenses for Executive staff and the numbers in Executive positions,
2. Number of employees.
3. Population (from consensus) within the municipality.

The plot is thickening. Perhaps the municipality is butt hurt and clutching at straws? The best defense is attack, perhaps this is what is happening here?
Perhaps the municipality sees the mines and farmers as a opportunity to milk them dry as well?

And it’s made easier as they are using taxpayers money to fight the legal battle so for these officials it’s a shot to nothing.

Municipal ChANCers in denial – of course.

Bertus should get all his ducks in a row here.. Everybody in SA knows how corrupt ANC controlled municipalities are. He is going to cost his client a lot of money and dhe tax payer will again have to carry this burden. Bertus, your client is witholding the truth from you!!!!

I suspect Bertus doesn’t give a flying fig about the truth. Client that can be billed with ease and maximum numbers is a gift horse not to be looked in the mouth. The only losers in this game are the taxpayers – you and I.

Quote ‘It acknowledges Eskom’s argument that the municipality finds itself in financial difficulties due to its failure to act against arrear debtors, but says it is impossible to issue summons to 30 000 consumers very month. Apart from the fact that there are not enough attorneys to do that, half of the local population is unemployed and such action would result in unrest, the municipality argues.’

In a nutshell the unfixable problem of South Africa in one sentence. ‘Would lead to unrest’ in other words civil anarchy. They were promised free everything so the government better find a way to give them free everything. So keep killing the hands that feed, keep ignoring the crime rate and the only source of funds to provide the free everything will either be dead or emigrated. You cannot give children a hand grenade to play with and hope they dont pull the pin, they will eventually find it and tug on it.

Precisely … but now what?

We play the “tick tock” game. Only a matter of time.

Idiots at their very best.

It acknowledges Eskom’s argument that the municipality finds itself in financial difficulties due to its failure to act against arrear debtors, but says it is impossible to issue summons to 30 000 consumers very month. Apart from the fact that there are not enough attorneys to do that, half of the local population is unemployed and such action would result in unrest, the municipality argues.

That settles it then. Do your work called revenue collection. And remember the user pays principle. Hello, no payment no electricity.

Seems NOBODY has a workable solution that in ANY way will recognise in the first place the root cause of the problem – and then at least, attempt to propose steps to address a long-term solution???

Simply chanting “ANC Cancer” is NOT a “solution”.

If the ANC was replaced with some other party… Would that suddenly fix the problem?

The EFF would make EVERYTHING worse. Immediately! They would make the ANC look good again.

The DA? Is a feckless party that mistakenly thinks that “good governance” alone is the solution in itself. One can see this outcome in DA-controlled areas. Alan Winde is an excellent provincial administrator. But the problems of poverty, crime, and unemployment are NOT evaporating in these areas. At all. They are steadily INCREASING.

Winde has no CREDIBLE plan to solve the root causes of these problems. It’s all talk. And plenty of hand-wringing! And NO real results. Just an illusion of “progress”.

So what’s the root cause you’re referring to?

What is the root cause of the problem? It’s socialism and specifically how socialism relates to the democratic process. Socialism promises you the product of another person’s labour via the tax / wealth redistribution system. Simply put you get to consume wealth without producing wealth. That wealth was taken from another by force or threat of force. There are moral issues at stake but these do not detract from the consequences of such a system.

If one looks at the statistics of people who produce wealth we find the distributions are very positively skewed. The median (50th percentile) wealth production per individual is far less than the mean (average) wealth production. Most people produce very little or no wealth. Others produce enormous wealth. Put alternatively, for every dog there are hundreds of ticks. For the ticks, socialism is very attractive. Something for nothing. Like winning the lotto or finding a wallet stuffed with lions. However, they are blind to the consequences.

The market will always win in the end. The path to the market solution can take one of two ways:

1. The status quo is maintained. This will lead to a collapse of the local authority. Property prices plummet in a downward spiral. The dog is dead or has absconded to greener pastures. Services are non existent. No power, no water. Eskom says tata. The water infrastructure was stolen for scrap and there is no money for the replacement. In the absence of water, sewage that used to run in the road has now dried in the potholes. If you want power then get solar or a generator. Once this stage is reached, many people start realising that paying for services is in their best interest. The exchange of Rands for kWh or kL is maximising their utility. The municipality has changed, however. The deliver services based on a fair exchange of value rather than assisting their constituents to plunder unseen unnamed others who are no longer there.

2. The local authority enforces payment. Those in arrears or those who cannot or will not pay have their power or water cut off. User pays principle. Those used to consuming the wealth created by others, as a right, are now understandably unhappy. They revolt in the usual fashion (violence and property destruction, as is their wont). The current incumbents are voted out and a party promising the continuation of the plunder is installed. However, they do not and cannot realise the unsustainability of the situation. That takes wisdom and perspicacity. The pillage is always ephemeral. Scenario 1 plays out.

It will get a lot worse before it gets better. No political party can fix the socialist mindset. Learning the hard way is the only option. That much is true.

Are you for real? The D A has has shown that a bad situation can be turned around but you dismiss them out of hand!? If nobody can solve the problem your best bet is to leave the country on a one way ticket.

That which you propose is the ultimate solution I fear. What will be left then is a kindergarten without any teachers / supervisors. Chaos. And chaos begets yet more chaos. See the trailer in Zim. Rock bottom is the destination, until the new colonisers step in. How much are lessons in Mandarin?

Yes, Nostra… That’s EXACTLY what many erstwhile DA supporters have done.

They saw the writing on the wall in the hopelessness of the spinelessness of the DA leadership, and came to your conclusion!

They have LOST confidence in the ability of the DA to take a stand on anything of substance, and made a run for it instead. In the thousands!

That’s probably worked out very well for most of them.

But this confers great benefit to SA? How?

Municipalities have all the legal avenues they need to collect revenue, but they prefer the lazy option, which is to cut electrcity for debt that is not electricity related, e.g. water, property rates, etc.. By cutting electricity, they actually cut their only real stream of profitable revenue. They should therefore not blame Eskom for their own incompetence. Eskom and municipal areas of supply are entrenched in legislation and regulated by NERSA. They were fully aware of this from day one and should not have allowed their own customers to adopt a culture of non-payment and they should never have allowed their Eskom account to go in arrears. The municipality is 100% to blame for the current situation and the government’s role was to keep the council and top management responsible from the first day their Eskom account went into arrears. Unfortunately they are all “deployees” and were protected instead.

I’m sure the Midvaal municipality has the same problem with unemployed people, and yet they find a way to make the majority of users pay for their services – https://www.moneyweb.co.za/news/south-africa/emfuleni-and-midvaal-enter-the-record-books-but-for-very-different-reasons/. The difference is the absence of an ANC deployed cadre supposed to be running the municipality, but doing nothing, and the presence of proper leadership in Midvaal in the form of executive mayor Bogani Baloyi.

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
― Frédéric Bastiat

Hundred and how many farms? Owned by ONE municipality?
We need some more transparency on land ownership!

Is this land productive? Is it adding economic value? If were were serious about growing this economy we would set up co-ops and put this land to work at direct rental cost to the farmer. All profits on sale to be split between the farmer and community trust while facilitating skill transfer.

With the end goal of get our exports going in the right direction – the world population is surging with and endless demand for food!

Because heaven knows were aren’t going to increase demand for the Rand with FDI!

My experience with these farms are that they are usually close to townships and not fit for farming, due to continuous harassment and theft by the towns people. The farms are normally abused and over grazed to the point of no value by the so called “emerging farmers”, who abandon them when all the pumps and equipment have been sold as scrap metal. Eskom may think that they have claimed valuable land, but I think that is only on paper.

Municipality owned land belongs to the ratepayers and residents who indeed comprise the municipality and they should be consulted before some thieving fatcat anc deployed cadre hands it over to fund their own incompetence, malfeacence, theft and fraud!…phht.

When Eskom gets split there is going to be many of these issues.

There are places in CPT for example that are entirely within CPT but supplied by Eskom. So you can have case where you are paying Eskom plus 55% council markup tariffs but your competitor 200m away pays Eskom tariffs that are actually very close to the Megaflex tariff that the council pays.

Councils have come to rely on electricity profits to subsidize their various other cost centers. Most of those cost centers are essential. Yet, Eskom and its direct clients benefits from those essential services and contributes nothing to them.

It will have to change when Eskom unbundles.

That is a different argument than what these clowns are on about though. The big mines have dedicated Eskom owned HV substations

Don’t be ridiculous, Johan. This is precisely the kind of mindset that has resulted in the disaster we see unfolding before our very eyes in SA. What is the mindset? When you pay for something you are paying for something else for someone else. That someone else gets to consume the wealth you have created for nothing. You are correct one aspect. When Eskom unbundles and privatises, Electricity uses will pay for their electricity not for the community centre or the new playground equipment in the park. You will not pay for essential services in your power bill any more than you do when you shop for groceries. The sales of electricity will be taken away from municipalities and given to the private sector for two reasons: firstly the municipalities [corruptly] use electricity revenue as their cash cow to fund other activities and secondly they suck at their job (power distribution). The funding of the “essential services” is derived from the municipal rates one pays on the property one owns by living in the community.

Bertus is the only guy that is sure of getting what is due to him! A game of delay whilst the 30 000 should have been cut long ago. But too lazy to do the recovery work and awake when money is there to pay councillors and officials but dont care about those ratepayers that do pay. All the years the dealy game is being played and leadership to tackle the real issue of non-payments

I know its a bit late and someone may already have asked the question and a reply been provided – but I missed it.The question is “what the hell is a municipality doing buying and owning farms”? A municipalities main function is to provide services – water, electricity, sewerage, roads, pavements, parks, street lights, issue licenses and various similar activities including the administration of these activities – where does farming come in? Can I buy veggies, meat and milk from the councils now? Or am I missing something?

Reasonable assumption, those “farms” are situated next to “informal settlements” which makes them largely unusable for anything. Have those “farms” any value? Highly doubthful, except when the likes of EFF use them for land-invasions thereby stealing from municipal taxpayers?

End of comments.

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