Municipality battling to honour Eskom payments
The City has been in continuous communication with Eskom to find amicable ways to settle its debt due to liquidity problems.
MBOMBELA – A special council meeting was held at the Mbombela Civic Centre last month, where the first quarter budget performance for 2019/20 was discussed.
Joseph Ngala, spokesman for the City of Mbombela Local Municipality (CMLM), stated that the City’s cash flow challenges were well known. “We are settling R72 million of Eskom’s debt, which was outstanding for 90 days or more. CMLM is currently not on the list of those debtors to be disconnected.”
He did not confirm when the amount will be paid.
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An amount of R380 million is owed to Eskom, according to CMLM’s budget performance report (BPR) as of the end of September. CMLM further plans to settle R112 million of the electricity provider’s debt in December, which has been outstanding for between 61 and 90 days, according to Ngala. CMLM’s operational banking account stood at R91,7 million as of September 30, according to the City’s BPR.
The DA’s caucus leader, Cllr Sanley van der Merwe, queried the current operational account balance.
“How are we going to pay our Eskom debt, currently hovering above R380 million? We cannot even take a loan, because it is not possible to take out a loan to finance debt.
“It is against the Municipal Finance Management Act and our equitable share from government will only arrive in December,” Van der Merwe said.
Eskom charges interest on overdue accounts after 15 days for the larger power user accounts in terms of the electricity supply agreement (ESA) between the City and Eskom.
“How can Eskom expect us to pay within 15 days if we can only collect the money 30 days after the invoice has been received?” Van der Merwe said. She stated that the ESA must be scrutinised and monitored.
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The CMLM’s BPR reflects that the city had to write off R6,4 million in Eskom interest. It was, however, indicated in the same CMLM report, labelling this expenditure as fruitless and wasteful, that “the finance department is taking preventative initiatives to minimise the interest charges by suppliers due to cash flow constraints, by prioritising payment to those interest bearing creditors”.
Van der Merwe indicated that the prioritisation of creditor payments has a major real-time impact on the financial recovery plan of the municipality. One of her biggest concerns, however, lies with CMLM’s debtors, whose outstanding accounts amount to R496 million and organs of state who owe the municipality R132 million, as per the quarterly BPR.
Ngala responded that Provincial Treasury is prioritising the debt owed by governmental departments through a municipal debt forum.
“These organs of state are served with notices in order for them to administer payment or to continue dialogue where there are reservations,” he said.
“The City is continuing to implement the Financial Recovery Plan (FRP) developed with the assistance of National Treasury, together with the municipal cost curtailment regulations.”
He expressed that the municipality is also embarking on a database cleansing exercise to ensure the reliability of its debtors’accounts.
