Eskom can’t cut people off because their municipalities owe money — court

Sakeliga has declared victory after the Constitutional Court denied Eskom leave to appeal in the Resilient case.

By denying the appeal, the court has upheld a Supreme Court of Appeal ruling that blocks government service providers like Eskom from punishing end-users when they are in a debt dispute with another government institution.

In Eskom’s case, it will no longer be able to disadvantage paying end-users due to non-payment by municipalities.

As a friend of the court in the case, Sakeliga said it argued that businesses and other end users couldn’t be held hostage in disputes between state institutions.

Sakeliga CEO Piet le Roux said that the implications of the Supreme Court’s ruling—which has now finally become binding legal precedent—are enormous.

“State institutions in dispute over an issue such as debt collection must now turn to intergovernmental dispute resolution, and the National Treasury has a responsibility to intervene to help resolve disputes,” said Le Roux.

“Prior to this ruling, these processes were not followed and state institutions such as Eskom could pursue an easy way out – to hold paying end users hostage until debts are settled.”

Le Roux said that the impact of the ruling extends beyond disputes between Eskom and municipalities.

“The ruling applies to all state institutions and comes down to the fact that state decay can no longer be made the problem of communities and private third parties,” he said.

“The national government also now has an undoubted duty to take responsibility for local and provincial state decay and can no longer deal passively with that responsibility.”

Le Roux said it is significant that the court is critical of the national government’s long-standing breach of duty in this regard.

Piet Le Roux, Sakeliga CEO

While Sakeliga said it is optimistic about the immediate relief for paying end-users of public services, it also believes it will be unsustainable if Eskom remains unpaid by municipalities.

To help tackle non-payment by municipalities, Sakeliga said it initiated litigation in the North-West province.

It is asking the court to appoint a special paymaster in municipalities to ensure payment of suppliers such as Eskom from the amounts collected for services such as water and electricity.

Sakeliga said that Eskom filed court documents this week in support of its application.

“Just as the Resilient case was not a complete solution, the special master litigation alone will not render municipalities functional,” said Le Roux.

“However, it is part of a proactive strategy to either restore proper governance and service delivery, or to create an alternative to relieve state institutions of burdens where they are unable to deal with them.”

Andre de Ruyter

Eskom’s annual financial results show that as of March 2021, municipalities owed Eskom R35.3 billion. The debt increased by R7.3 billion during the last year.

The state-owned power utility said negotiations for active partnering agreements were underway with 45 municipalities.

This would allow Eskom to act as an agent for the supply of electricity, maintenance services, and revenue collection.

Outstanding municipal debt accounted for 8.8% of Eskom’s total debt of R401.8 billion.

Between 2005 and March 2020, Eskom’s debt securities and borrowings surged from R30 billion to R488 billion, peaking at R496 billion.

In the 18 months under CEO André de Ruyter, Eskom’s debt was reduced by over R90 billion — R81.9 billion in the last financial year.

Eskom said that it achieved this thanks to a R56 billion government bailout and a stronger rand.

Now read: Eskom doesn’t deserve a cent of taxpayer money — De Ruyter

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Eskom can’t cut people off because their municipalities owe money — court