Eskom to write off municipal debts

Deputy President Paul Mashatile says government acknowledges that debt relief alone will not return Eskom to financial sustainability, as the state works with municipalities to help settle mounting bills.

“A key assumption considered in the debt relief determination is the implementation of the recent tariff increase approved by the regulator. Without this increase, debt relief arrangement is not sustainable,” he said.

In January, the National Energy Regulator of South Africa (Nersa) agreed to an 18.65% increase in electricity tariffs, effective from 1 April this year.

In his Budget speech, Minister of Finance, Enoch Godongwana, announced Eskom’s debt relief of R254 billion.

The Deputy President was answering questions in Parliament on Thursday relating to the municipal debt to Eskom and water entities, illegal electricity connections, critical economic infrastructure sabotage, and animal vaccine shortages.

He said government is of the view that the sustainable provision of essential services such as water, electricity and sanitation must be the hallmark of a developmental government.

His task, working with the Department of Cooperative Governance and Traditional Affairs, National Treasury and other departments, is to ensure that municipalities deliver critical services.

In the meantime, government has been working around the clock to help municipalities settle their debt owed to Eskom and water boards.

Citing the latest data, he said by the end of 2022, municipalities owed Eskom R56.3 billion, and this debt continues to rise.

“Government has introduced a debt relief package for Eskom intended to improve the utility’s balance sheet whilst proposing that Eskom writes off some of the municipalities’ debts under strict conditions with guidance from National Treasury,” Mashatile said.

Meanwhile, he announced that municipal debt relief will be conditional and application-based.

“This relief is aimed at correcting underlying behaviour and operational practices in defaulting municipalities.”

Parallel to this process, the state-owned power utility is introducing a smart metering solution to change consumer behaviour by reinforcing a culture of payment for services rendered.

The Deputy President described the culture of non-payment by municipalities, but also organs of state and individual household customers, as “concerning”.

“As the government, we cannot overemphasise the need to enforce the culture of payment for services rendered,” he said.

National Treasure further developed the Eskom debt relief as a measure to improve Eskom’s financial situation.

He told Members of Parliament that municipalities and water boards are responsible for 65% of the debt to the water trading entities, of which R10.9 billion is overdue by more than three months.

According to the country’s second-in-command, the escalating debt in the water sector is attributed to the absence of economic and regulatory regimes for infrastructure investment, costing and pricing, non-payment of services, and unauthorised connections.

“The government has put in place the measures to strengthen billing and revenue collection to address the escalating debt of municipalities to water entities,” Mashatile said.

These include the adoption of credit control and debt recovery measures across all water boards and the installation of bulk-prepaid metres in municipalities.

“The success of all these relief measures is dependent on coordination across all spheres of government. This is why the government will continue working with all sectors of society to increase and build sustainable economic activities in all municipalities to create viable tax bases to develop revenue for social and economic development,” he added.

In addition, he said government, working with Members of Parliament and all civil society formations, is ready to work with every sector to advance the common national agenda of fast-tracking and addressing the triple challenges of unemployment, poverty and inequality.

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Eskom to write off municipal debts