Eskom’s municipal debt surges to R74 billion — and its solution isn’t working

Municipal debt owed to Eskom reached R74.3 billion by the end of April 2024, and the National Treasury’s municipal debt relief programme isn’t working.

Eskom Group CEO Dan Marokane says 72 municipalities have secured places in the programme, but only 4% are compliant.

This was revealed during a media briefing on Friday, 14 June 2024, where Marokane highlighted key milestones and challenges faced during his first 100 days in office.

“The current level of municipal debt acceleration is unsustainable,” said Marokane.

Eskom general manager Agnes Mlambo noted that of the R74.3 billion, R5.6 billion is owed to Eskom by the country’s major metros.

In a statement released following the briefing, Eskom said advocating for and pursuing a sustainable solution for municipal debt will be one of its key focuses over the next three years.

It’s worth noting that municipal debt owed to Eskom has remained relatively stable in 2024. The power utility’s interim results for the six months ended 31 September 2023 revealed that the figure had reached R70 billion.

It had climbed from R58.5 billion as of the end of March that same year.

The power utility said municipal debt had continued to grow from already unsustainably high levels.

Invoiced municipal debt totalled R13.6 billion, meaning it has increased more than five-fold in under five years.

The figure of R70 billion as of September 2023 represented a 32% increase from September 2022.

Electricity minister Kgosientsho Ramokgopa noted that if the municipal debt continues to grow unaddressed, it will place an unsustainable burden on Eskom.

To this end, Eskom said it was critical for the National Treasury to implement the municipal debt relief programme.

Applications for municipalities to enter the debt relief programme, which launched in May 2023, closed at the end of October 2023.

To qualify for the programme, municipalities had to apply and meet certain conditions for approval, including staying up-to-date with their current accounts and rolling out smart meters.

A municipal contractor disconnects defaulting customers.

The conditions for debt relief from the National Treasury included:

• They must stay on track with their current account payments for the next year.
• They must roll out smart meters to improve the efficiency of their electricity distribution networks.
• They must remove illegal connections on their networks.

Things didn’t get off to a great start, with Ramokgopa revealing in August 2023 that only 11 of 28 approved municipalities had honoured their agreement with the National Treasury, while seven had been partially honoured.

Large metropolitan municipalities are also guilty of failing to pay their Eskom invoices timeously.

The state-owned power utility is currently battling Johannesburg’s City Power over a debt of R1.1 billion.

“The power utility started to default on its payments from October 2023 and no payment was received for the March 2024 invoice,” said Eskom.

“The debt owed by City Power has reached unprecedented levels, exacerbating Eskom’s already strained financial situation.”

It said it was left with no choice but to apply to the Johannesburg High Court for a declaratory order forcing City Power to pay its outstanding debt.

However, City Power fired back, saying it has declared a dispute against Eskom for allegedly overbilling the municipal power utility on bulk purchases dating back to 2021.

“Eskom has admitted in some cases that there have been potential billing inaccuracies and has so far refunded City Power at least R483m over the recent years,” it said.

City Power says Eskom owes it R3.32 billion.

Eskom preemptively rebutted City Power’s allegations in its initial public statement, saying that even if it was overcharged, that didn’t negate City Power’s responsibility to pay bulk power bills.

“Eskom denies the claims made by City Power and will prove its position through the arbitration process,” Eskom said.

“In terms of the electricity supply agreements sanctioned by the Electricity Regulation Act of 2006, if a municipality raises a dispute with Eskom, it must still pay.”