Proudly sponsored by

Eskom to distribute electricity and handle billing and collection in Maluti-a-Phofung

Final court order expected to sanction first such agreement, with more to follow.
There could be resistance from communities that are currently not paying for electricity. Image: Bloomberg

The High Court in Pretoria is expected to grant a final order next week that will mandate Eskom to act as an agent for the struggling Maluti-a-Phofung municipality in Harrismith and execute electricity distribution on its behalf.

Read:

Eskom has confirmed that this will constitute the first of several so-called active partnership agreements with struggling municipalities that includes “a full suite of active partnering which includes distribution, reticulation and revenue management services”.

Legislative stumbling blocks

While commentators have warned against numerous stumbling blocks in municipal legislation, the 16 applicants – including Afgri Milling, the Harrismith Business Forum, Nestlé South Africa, Nouwens Carpets and Busamed Harrismith Private Hospital – based their arguments on constitutional grounds that allow the court to find a just and equitable remedy that cuts through other legislation.

Maluti-a-Phofung is one of several municipalities which together owed Eskom R35.3 billion at the end of March, and large power users have already been paying their electricity bills directly into Eskom’s account for some time following an earlier court order.

Read:

The latest agreement was supported in court by energy regulator Nersa, and the minister of finance and Free State MEC for finance have been ordered to appear in court on June 8. They will be required to indicate whether the provision in the agreement that the municipal electricity revenue will be paid directly into Eskom’s bank account is reason not to make the court’s earlier order final.

Commentators earlier pointed out that municipal legislation requires that all municipal revenue be paid into the municipality’s principal bank account.

Attorney MC Botha of Joubert Galpin Searle, who represents the applicants, says intense engagements are ongoing to address the concerns and establish a lawful contractual framework for Eskom to provide the service on behalf of Maluti-a-Phofung.

Process

The interim order provides for Nersa to approve the Distribution Agency Agreement between Maluti-a-Phofung and Eskom, and Nersa has agreed to this role.

Should the two parties fail to reach agreement within two weeks of the issuing of a final order, Nersa must settle the dispute within three weeks. Failing this, either party can go back to court.

According to Eskom the municipality still has the obligation to consult stakeholders about the agreement. It is not clear when this will happen.

‘Dire’ situation

Municipal consultant Werner Zybrands says the situation in many municipalities is so dire that parties must find alternatives.

He however cautions that the court order will result in a side-stepping of control measures in municipal laws.

At a practical level he warns against fierce resistance from communities that are currently not paying for electricity when Eskom tightens collection practices.

If communities are consulted about the agreement after it has already been finalised, it would serve no purpose, he says.

He further poses many questions about, for example, human resource management of municipal staff where Eskom takes the lead and makes arrangements around funding.

The issue of central control

Zybrands warns against diminishing democracy at local level in favour of central control and asks how ratepayers in Harrismith will hold Eskom, based in Sandton, to account.

Eskom has so far entered into partnerships with the Phumelela municipality in Vrede in the Free State and Raymond Mhlaba municipality in Fort Beaufort in the Eastern Cape to assist with revenue collection in certain areas, and with the Msunduzi municipality in Pietermaritzburg for the maintenance of the distribution network.

Assistance aspect

The agreement with Maluti-a-Phofung is for five years and Eskom hopes that at the end of this period the power utility “would have assisted the municipality with building its capacity and skills transfer including billing and revenue collection capability”.

“For service delivery improvement, priority will be given to the maintenance and upgrading of the municipality’s substations and distribution network,” it adds.

Eskom says the results may vary depending on the specific challenges each municipality may face.

“However, Eskom expects to see improvements in revenue collection within 4-12 months, improvement in security of supply and improved service delivery within 1-2 years. Infrastructure refurbishment will take up to 5 years and is dependent on available funding.”

Eskom says each agreement will spell out the list of services to be rendered.

Funding

“Funding will be a combination of sources from National Treasury, Department of Mineral Resources and Energy, interest bearing loans and/or self-funding from the collections.

“The municipalities will be invoiced to reimburse Eskom for all costs incurred and services provided.”

Bertus Maritz, an attorney with Bokwa Incorporated who represents several Free State municipalities, warns that depriving Maluti of its electricity revenue may result in higher rates.

“Electricity revenue and rates are the two major sources of income for all municipalities.

“Maluti-a-Phofung will still have to pay salaries but be without any revenue from electricity sales,” says Maritz.

“Large portions of its area of jurisdiction is tribal land and the rates burden is largely on those people living in the towns.”

COMMENTS   18

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

You must be signed in to comment.

SIGN IN SIGN UP

Is this correct — A Utility that is owed over R37 Billion is going to teach a municipality about revenue collection ??
You cannot make this up if you tried !!

The municipalities are the cause of Eskom’s debt though. They are middlemen who make electricity money disappear. So it makes perfect sense for Eskom to cut them out.

Actually, the municipal debt owed to Eskom is a drop in the bucket of the total Eskom debt. Eskom sank themselves.

Any consequences for the head honchos running this municipality? Take away one of their land cruisers and Jeep and paint the other red from the traditional black.

Good solution to the problem of Municipalities that are not efficient at best or fraudulent at worst!
Thank goodness Eskom CEO is not yet another BEE appointment! At last we have governance by someone based on experience and expertise rather than the color of their skin..
Well done Eskom – holding thumbs that this proposed solution gets SA Inc. back on its feet and the SA ratepayers some value for their money!

“At a practical level he warns against fierce resistance from communities that are currently not paying for electricity when Eskom tightens collection practices.”

So we mustn’t upset the “communities” that aren’t paying for services and are at least partly responsible for the mess in which the municipality finds itself in the first place (the other responsible party being the usual incompetent municipal “officials”). “Fierce resistance” should be met with fierce retribution – that should sort out the problem for once and for all.

Noted and agreed in principle however looking at it from the other side: “We cannot risk upsetting the voter base and thereby loose valuable majority votes”.
Rather penalise the minority that do pay without the risk of loosing votes.

One word, “Soweto”.

clean them up and the rest will be easy.

Load reduction is wrecking havoc with Soweto and other GP townships residents. If only CoJ can come to the party and apply 4 hour load reductions to areas that have low payment rates like Alex, Ivory Park, etc
Eskom kind of has a winning formula to recover some revenue from these nonpayers.

If CoJ do what Eskom does they will lose the next election. So CoJ will not commit suicide and happily allow this mess we are in to carry on.

Just one more mess proudly brought to you by the racist, corrupt ANC!

How is this going to work? The ANC used Municipalities as honeypots for Cadre deployment, exchanging cushy Council jobs for local strong arm support. Now these rent keepers stand to lose their god-given (read ANC given) guaranteed incomes.

Some very unhappy deployees about to start moping around council offices

Burn a tire, kick over a rubbish bin. Winnie style.

Denel employees are getting 20% salaries, SA Express employees were boarded without any payments like SAA. So, you gonna see Harrismith municipality workers getting reduced payments and skipping payments some months very soon. ANC workers at Luthuli House are already exposed to this…money does not grow in trees.

So last week we read about COJ taking over from Eskom, and the above examples are the reverse. Something is upside down here.

To me it is still (for both as legal entities) a case of the blind trying to lead the blind – it took eskom 20+ years to discover that the municipalities did not pay for electricity sold to them while each and every mayor and cadres lived like a king in their little town. now eskom wants to show / teach them how to pay their account, whilst their own management for the last 20 years was nothing to wrote home about. with the current new ceo they also discover that, although minimal in relation to eskoms own massive debt, it will help with eskoms cash flow.
keep in mind: a new ceo will not be able to revamp old power stations into brand new power stations with another 40 /50 year life span – what should have been done 20 years ago was ignored then – the damage is done – eskom is currently in a survival battle / crisis management state – any cash inflow is welcome. still waiting for last 2 power stations to be in full production after how many years overdue of the project completion – all at the cost of the taxpayer

Maluti-a-Phofung muni also includes Phuthadichaba and Kestrel. Phuthadichaba was previously part of the two Qwaqwa homelands. Most inhabitants of MAP live in Phuthadichaba. And probably not many of them pay rates, taxes and possible also not for power.

And in the City of Johannesburg, City Power wants to reduce reliance on Eskom without generation capability in hand….

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

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

Follow us:

Search Articles:
Click a Company: