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Municipalities owe Eskom R31.5bn

Up from R6bn in 2016.
Eskom must deal with a problem not of its own making; this is a municipal revenue collection problem. Image: Waldo Swiegers, Bloomberg

Eskom is defending its ‘foreclose’ on municipalities that owe it billions in overdue debt.

Over the past few months, the struggling power provider has not been afraid to show its ruthless streak in clawing back the R31.5 billion owed to it as at the end of August by some municipalities and has thought nothing about taking control of bank accounts and seizing assets.

The issue of rising municipal debt is one of growing distress for the state-owned power utility. It has seen this figure grow from R6 billion as at March 31, 2016, to R28 billion as at March 31 this year.

This effectively means this debt has been growing at 34.5% since 2016.

This growing liability has seen it take control of 139 farms owned by the Matjhabeng municipality in the Free State, and seize the bank accounts of several municipalities, which owes it hundreds of millions of rands.

Read: Eskom attaches 139 farms of FS municipal council

The Maluti-a-Phofung Local Municipality, which had its bank account attached in July 2020 and owes over R5 billion, has accused Eskom of negotiating in bad faith as it had reneged on agreements reached in an inter-governmental committee meant to sort out the issue.

The matter between Eskom and the likes of Maluti-a-Phofung are now being played out in the courts, but it and the other defaulting municipalities should not have been surprised by the power company’s hard stance.

Read: Eskom compared with Shakespeare’s Shylock – court

In Eskom’s 2019 annual report it already said: “Recently, we obtained a default judgment against Maluti-a-Phofung Local Municipality and have attached their movable assets in an attempt to recover amounts due. We have also started issuing summonses to municipalities as an alternative measure to recover outstanding debt. Summonses have been issued to a further 15 municipalities.”

This was after it had reached 51 payment agreements with defaulting municipalities by the end of March 2019.

The issue around municipal payments has hardly improved since then, with its 2020 annual report noting that “only 20 were being fully honoured, including only one of the top 20 defaulting municipalities”.

The whole picture

But the picture Eskom is sketching of the defaulting municipalities is not the whole picture, with some saying they are doing their bit despite tremendous difficulty.

“We are paying Eskom – it’s just we are unable to pay the billed full amount due to non-payment of services by the community because of the high unemployment rate,” insists Emalahleni city manager HS Mayisela.

Mayisela says given the economic difficulty in the Mpumalanga municipality, maintaining payments has been very difficult.

This was backed up by Emalahleni’s budget, which noted that service revenue target was reduced from R2 billion to R1.5 billion for the 2018/2019 period.

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

Mayisela says despite its own financial difficulty, it has removed illegal connections and is currently implementing “load reduction and shedding to the low and non-paying areas”.

Its efforts to get people to pay what they owe has come at a tragic price.

“As we implement our credit and debt policy in terms of cut-offs, our employees are attacked, and so far, we have suffered two fatalities and numerous injuries.”

Emalahleni is not the only municipality committed to paying what’s owed. Modimolle-Mookgophong Local Municipality mayor Marlene van Staden says the Limpopo municipality has kept to its payment arrangement with Eskom; by August, it had paid the utility about R100 million the 10 preceding months.

Debt on debt

There is also the not-so-small matter of the interest Eskom charges on overdue accounts.

“Arrear debt owed to Eskom as at 31 August was R31.5 billion. [Of which] R6.8 billion relates to interest charges accumulated over the years due to non-payment,” said the utility in response to questions sent to it.

Eskom says given the legislation it operates under, there is little room for it to show leniency.

“Eskom is compelled by the Public Finance Management Act to make every effort to collect all revenue due to it.”

It has however tried to show some lenience to struggling municipalities.

“As from July 2017, Eskom reduced the interest rates charged on municipal overdue debt as well as increased the payment days from 15 to 30 for struggling municipalities to make it easier for these municipalities to settle their debt owed to Eskom. Eskom also allocated the payments to capital first before interest.”

Not an Eskom problem

The issue around the monies owed to Eskom is not actually an Eskom problem, but rather a municipal revenue collection problem.

Municipalities are heavily reliant on reselling Eskom’s electricity as a way to generate revenue. But when mismanagement undermines their own ability to collect what is due or suffer the fallout of an economic shock like the Covid-19 crisis, they have few options when it comes to making ends meet.

Also not helping the situation is that neither the municipalities nor Eskom have the power to push through tariff increases; both have to depend on a rate increase imposed on them by energy regulator Nersa.

The national government has not provided much guidance when it comes to setting up new revenue streams for municipalities or sorting out what’s owed to Eskom.

The International Monetary Fund, in its 2018 Article IV country report, points out that the minimising of municipal reliance on electricity revenue is one of the structural reforms needed to accelerate economic growth.

Alphabet soup

This issue continues to be unresolved despite the formation of the Inter-Ministerial Task Team (IMTT), which according to Eskom’s 2020 annual report was “established to address the systematic and structural issues behind municipal debt as well as related operational challenges”.

The IMTT could not achieve this goal. “Regrettably, there has been no significant progress on the IMTT recommendations during the year.”

There was no improvement by the IMTT’s successor, the Inter-Ministerial Committee on Service Delivery (IMCSD) led by deputy president David Mabuza.

The IMCSD has fallen away and it’s now up to the Eskom Political Task Team (PTT) – also chaired by Mabuza – to sort the matter out.

The PTT now has the job of implementing the IMTT’s recommendations. This amounts to the rollout of the National Payment for Services Campaign, piloting the installation of prepaid smart meters, and, with support from National Treasury, considering municipal budget compliance to ensure that current accounts are paid.

For its part, there is almost an understandable sense of melancholy when Eskom notes in its annual report that the latest effort on the part of the state to resolve the debt matter has yet to show signs of progress.

“We are fully participating in the work of the PTT, although improvements from these initiatives are yet to be seen.”

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Disgusting!!! Time Eskom faces the fact that non-payment problems are their own fault. So, stop scr*wing with the paying customers and collect what is owed.

I realize that it is a lot of money that the municipalities owe Eskom, however that only constitutes 7% of their outstanding debt. Are they addressing where the other 93% of debt came from?

The long term solution for this is the direct payer system. Municipalities cannot be trusted to allocate the fees and levies on the electricity to anything other than salaries. Factual proof of this can be seen in reports dealing with the disparity in salaries from private sector and government sector for the same work.

Generally speaking Laws are Created to Punish those who abide by them not the criminals who work outside of the system.

With Socialism you cannot punish the Collective as a whole but only individuals who stand-out either in Minority Groups or as Individuals themselves, they are then segregated and made an example of in public as you can see with the Senekal Farmers and “Commercial Media” who name; shame and shun these people.

When it comes to the payment of public services the Collectives organise and show total disregard Law and Order, these very people have now been elected as public offices show the exact same capability that they did when they were private citizens.

In simple terms, the voters have now become the voted and the greater public’s progress and growth will be limited to the same Cognitive Ability of these folk.

We can only but expect our society will further deteriorate until we all live and suffer in the same way as the collective.

The only way that Good Folk and Law Abiding Citizens can overturn this unfortunate future is to Act in the same way as the collective become in the Enemy Within.

Excellent post PC – a function of the Proto-Marxist mantra of: everyone must have everything but “you to whom I give nothing and vilify, must pay for it”. An analogy, I walk into Woolworths to buy a shirt. The assistant slaps me in the face and throws coffee over me. He points me to the shirts and I now must buy one. He points to a long queue of people and says I must give them that shirt. I do so, or risk further abuse. Once paid for I leave with nothing and get a kick on my backside and booing as I walk out. The old-school communists did so instantaneously and simply confiscated the property of the bourgeois, here in Azania it happens more slowly and with stealth. How long will we be paying for those shirts and being abused? No longer for many. Thus no one has a shirt and the whole nation proverbially “loses-its-shirt”. Thank you SACP / COSATU / ANC

Every year this time around we hear about this debt, then government gives money to the local municipalities to pay this debt. It is actually just another bailout to Escom, being done for the last 25 years.

The Ans has sown the seeds of discontent — now it must reap the whirlwind coming !!

The ANC has painted itself into a corner. The vote-buying populist policies have destroyed the economic foundation that funds the populist policies. Local government steals from the national government as citizens do not pay for services and citizens plunder SOEs through BEE beneficiation and the rigging of tenders. With the condonation of the ANC. The ANC has been funding the inflated salaries of Cosatu members and government employees by borrowing from the pension fund savings of those same workers. The GEPF is the largest lender to government. The ANC is a starving dinosaur that regurgitates the same old money repeatedly without taking in any new money because it has trampled on the tax base.

The members of Tripartite Alliance own the government debt that funded their salaries. They have borrowed from themselves. The ANC pulled the wool over the eyes of government employees by using their own money to fund their inflated salaries. In fact, the salary of every government employee is funded by the pension fund of the person who sits next to him in the office. In this way, when they strike and protest for higher wages, they are simply demonstrating against their co-worker and extorting the “comrade” next to them.

A wealth tax and a tax on capital will simply accelerate this regurgitation of old money that is in the system already, of which most belong to government employees and ANC members. Basic, easy to understand economic facts act as a smokescreen to confuse ignorant socialists, and to prevent them from understanding that they have been stealing from themselves for the last 25 years while funding their corrupt leaders for all this time. When this old money is depleted and the regurgitation eventually ends, the ANC will go extinct.

Eskom should sell the debt to professional collectors. Even if they only get 50c in the rand it will help thier insatiable need for bailouts.

Can someone please explain to me why over time the whole country could not operate on prepaid meters

Because most connections are illegal?

They’ll break them to sell the copper

Prepayment meter technology is at present limited to relative small connections, like single phase households and small 3-phase household and commercial. The meter technology needed for large connections are a lot more complicated and I am not aware of anyone in SA offering it in prepayment. But yes, all household and small commercial connections can be converted to prepayment, one of the problems is the cost, as prepayment meters are much more expensive. It will also not work without the political will to force people to pay for their consumption, as even a split prepayment meter, with the metering part in a box in the street can be by-passed by illegal operators. I know of a municipality where the electrical department covered the boxes with 1 ton precast concrete enclosures, but the politicians forced them to remove it. Electricity theft is a mindset thing and only the politicians can change that. I know this because I have experience of a municipality where the politicians supported the officials to stop electricity theft. It worked!

Auretha and that mythical yet-to-be-named municipality again…..

Much of this is due to illegal connections in squatter camps where the dwellers are ‘sold’ stolen electricity from illegal connections and this is facilitated by intermediaries such as ANCfront people. I know this first hand.

This is how stupid greed and misplaced philanthropy motivates individuals to apply socialist policies to buy votes. The collectivist mindset incentivises the most unscrupulous individuals in the community, some are ANC ward chancellors and some are academics at universities, to plunder the assets of that community to support and improve their personal material position.

They are not benevolent or philanthropic, they contribute nothing. They are real parasites that feed on the ignorance of their fellow man.

It was reported in the Sowetan in February 2020 how residents in Soweto paid a group of electricians from Sebokeng to make illegal connections in Mapetla, Rockville, White City, Central Western Jabavu and Dlamini. They then placed whistles near the electricity boxes and when anybody sees an Eskom inspector they blow the whistle. The community members then come out and “ensure that the Eskom inspector leaves”. They have also rejected the flat R150 fee per month because it is not affordable. “An elderly man said: “We are not ashamed of what we have done. Not ashamed at all. “Eskom failed us and we could not live in the dark forever. If they wish, they must come here and try to disconnect us. We will kill them. I am not joking,” he said. See article titled:
“Soweto areas reconnect themselves to power grid BY PENWELL DLAMINI – 03 February 2020”

It is precisely through this method that African governments implode into anarchy and a failed state. They syphon off their own food security and livelyhood through the illegal grid connection. They think they are receiving power, but in reality, they are actually losing power through that connection.

SA, to a large extent, a nation that has been bred by the ANC to believe they are entitled to eveything and some one else will pay.
To quote Maggie Thatcher, “the problem with Socialism is that it eventually runs out of other peoples money”

Eskom, this happens when you don’t collect for services rendered.

Can’t run a shop and not charge for goodies sold.

But the municipalities are also guilty of non collection.

Just don’t understand the first principle of business, but they are a terrorist organization, never run a business before….

End of comments.

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