North Gauteng High Court dismisses AfriForum’s application
The amount owed by municipalities has risen to R10.2 billion, which grew over the past eight months from R6 billion. In the last five years, the overdue debt has increased tenfold with the March 2017 forecast being in excess of R12 billion.
Thursday, 05 January 2017:
The North Gauteng High Court today dismissed AfriForum’s application with costs, including the costs of the two counsels.
In making his ruling, Judge Hans Fabricius emphasized that it is necessary to appreciate the context in which Eskom operates in the national economy, seen against the background of its Constitutional rights and obligations. The Court also emphasized the duties of municipalities to honour their obligations to Eskom are important in the present context.
AfriForum, et al, had sought to interdict Eskom’s planned reduction of the supply of electricity to the defaulting municipalities. Arrears are located in municipalities in mainly the Free State, North West, Mpumalanga and Northern Cape Provinces.
The amount owed has risen to R10.2 billion, which grew over the past eight months from R6 billion. In the last five years, the overdue debt has increased tenfold with the March 2017 forecast being in excess of R12 billion.
Welcoming the court decision, Mr Matshela Koko, Eskom’s Interim Chief Executive, said that though appropriate legislation allows Eskom to completely terminate supply to the defaulting municipalities, as responsible leadership, we opted for a less invasive approach of scheduled interruptions for certain hours of the day.
“We didn’t take this path lightly as a company, we agonised on this matter endlessly. Besides the Promotion of Administrative Justice Act (PAJA) process, with which we fully complied, we embarked on a wide community-awareness initiative,” he said.
Eskom embarked on various interventions at provincial level with affected municipalities and representatives from the Department of Public Enterprises, National Treasury and the Departments of Cooperative Governance and Traditional Affairs to address the non-payment of the Eskom accounts.
The Judge also acknowledged that Eskom had consulted all the municipalities and relevant stakeholders extensively since 2011.
“To entice defaulting municipalities, Eskom offered to suppress future interest on the overdue amounts provided they adhered to the payment plans. At an interest rate of prime plus 5% this is a huge incentive and could save the municipalities millions of rand. Sadly, only two of the payment arrangements entered into are still being honoured,” Koko said.
The Electricity Supply Agreement, the Eskom Distribution Licence Conditions and the Electricity Regulation Act (Act 4 of 2006), empowers Eskom to disconnect the customers for non-payment after having given the customer 14 days written notice. This is a credit control facility.
It is imperative for Eskom to collect its revenues or else the entity will not be sustainable. For instance, Koko explained, municipalities contribute almost 42% of Eskom’s total sales and almost 41% of Eskom’s revenue annually – so non-payment of accounts has a significant impact on Eskom’s cashflow.
“Failure to act renders Eskom in breach of the Public Finance Management Act and its licence conditions, as Eskom is obliged to collect all revenue due and enforce the conditions of the electricity supply agreement with municipalities,” Koko said.
