Local debt to Eskom ‘points to dire crisis’

MUNICIPALITIES’ debt to the embattled electricity utility Eskom has trebled to R10.8bn in nine months and is threatening to spiral out of control, says Co-operative Governance Minister Pravin Gordhan.

Eskom has asked the government for an equity injection of R50bn to alleviate its acute cash-flow situation. This month, the National Energy Regulator gave Eskom the go-ahead to recoup R7.8bn in costs. This means that the 8% tariff increase Eskom has already been granted for next year could rise to 10%-13% to bring in the R7.8bn.

Eskom officials and Public Enterprises Minister Lynne Brown told Parliament two weeks ago that the amount municipalities owed to Eskom was R3bn in October 2013.

Mr Gordhan, replying to a parliamentary question from Inkatha Freedom Party (IFP) MP Mkhuleko Hlengwa, said as at the end of June the debt owed to Eskom by metropolitan councils and municipalities across South Africa was R10.8bn.

He said the Department of Co-operative Governance and Traditional Affairs was “currently engaging with all parties concerned to find a constructive solution to this challenge”.

Mr Hlengwa said the figures provided by Mr Gordhan were an indication of “a national crisis”.

City Power, of the City of Johannesburg, owed R1.075bn, Ekurhuleni Metropolitan Council owed R972,339m, City of Tshwane Metropolitan Council owed R793,000, the Nelson Mandela Bay municipality owed R292m, Buffalo City metro owed R128m, eThekwini Metropolitan Council owed R813m and the City of Cape Town owed R873m.

KwaZulu-Natal municipalities owed R1.27bn, Limpopo municipalities R314m, Mpumalanga municipalities R135m, North West municipalities owed R764m, Northern Cape municipalities owed R225m and Western Cape municipalities owed R1.27bn.

“These exorbitant amounts owed to Eskom are an indication of great failure on the part of municipalities to manage their debt in an orderly and systematic manner. There is obvious incapacity in terms of basic financial management,” Mr Hlengwa said.

“Even more worrying are the allegations that municipalities are diverting revenue collected from electricity rates to other programmes and projects instead of paying off debts due to Eskom.

“This narrow-minded financial practice of robbing Peter to pay Paul is going to lead to the collapse of both municipalities and Eskom at the expense of citizens who in turn bear the brutal brunt of these glaring failures.”

Cape Town mayor Patricia de Lille’s spokeswoman, Zara Nicholson, said: “The city is in good standing with Eskom. We settle accounts on a monthly basis by the due date.

“The published data currently being quoted are for all outstanding bills, including the current month’s billing, which may not yet have reached the due date for payment,” she said.

“A more sensible set of data would be to compare the 30-or 60-day arrears accounts. The City of Cape Town will be found to have zero arrears.”

City Power Johannesburg failed to respond to requests for comment.

Eskom finance director Tsholofelo Molefe and CEO Collin Matjila told Parliament’s portfolio committees on energy and public enterprises in late July that the outstanding debt was affecting the company’s bottom line and ultimately its “sustainability”.

Mr Molefe said disconnecting electricity to offending municipalities would be a “last resort” while Mr Matjila said that through a cost-cutting programme, Eskom could trim its operating budget by more than R60bn.

Mr Hlengwa said the IFP expected Mr Gordhan to ensure that municipalities settled their debts with Eskom by the end of the financial year in March 2015.

“Consumers find themselves under tremendous financial pressure when Eskom finds itself compelled to increase its tariffs because of debts owed to it,” Mr Hlengwa said. – Business Day Live

Leave a Reply