‘Sad situation’: Eskom warns growing municipal debt seriously risks its sustainability

Eskom has warned Parliament that growing municipal debt continues to pose a serious risk to the entity’s long-term sustainability.

Officials from the power utility appeared before the Standing Committee on Appropriations on Tuesday to brief MPs on the Eskom Debt Relief Amendment Bill.

The bill, introduced in 2023, provides R254 billion to support Eskom’s debt servicing obligations over a three-year period.

One of the key conditions attached to the relief is that Eskom is not permitted to take on additional borrowing.

Eskom strategic goals

During the committee meeting, Eskom’s Chief Financial Officer (CFO) Calib Cassim outlined several of the utility’s strategic priorities, including efforts to recover and maintain a 70% Energy Availability Factor (EAF) in the long term, in order to meet South Africa’s electricity needs.

“We know currently it’s sitting around 57% and we really need to increase that over the remainder of the year to get this average of 66%,” Cassim said.

He also highlighted the need for innovative strategies to tackle municipal arrear debt and reduce energy losses.

“One of our challenges is that how do we deal with the issue around municipalities, including metros, from a finance perspective; the importance of collecting what Eskom does supply in terms of the product that contributes towards our financial sustainability and liquidity,” he explained.

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Cassim added that Eskom is also focused on cost optimisation, revenue enhancement, leadership stability, and employee development.

The entity’s revenue rose by 16% to R264.60 billion in the third quarter of the 2024/2025 financial year.

This was largely due to a 12.74% electricity tariff increase approved by the National Energy Regulator of South Africa (Nersa).

Eskom also reported “significant savings” of R16.3 billion in diesel costs.

Regarding the debt relief, Cassim noted that Eskom had received R8 billion of the allocated R64 billion in the 2024/2025 financial year.

“The remaining R56 billion was drawn down by the end of March 2025,” he said.

Debt securities and borrowings have since decreased to R409 billion.

Eskom’s municipal debt remains a serious concern

While the debt relief programme has improved Eskom’s cash flow, Cassim stressed that municipal debt continues to pose a substantial challenge.

The debt, the Eskom CFO said, has been increasing despite interventions by the National Treasury.

“We need to arrest these arrears because if we don’t do that it’s going to neutral the benefit we do anticipate to receive from the overall debt relief.”

In the current financial year, Eskom is set to receive R40 billion in debt relief.

Rajen Naidoo, Eskom’s General Manager for Finance in the distribution division, reported that municipal debt currently stands at R94.6 billion.

READ MORE: R100 billion debt: only 10 municipalities honouring their accounts

He attributed the persistent non-payment issue to deep-rooted structural and systemic problems within municipalities.

“Municipal debt is a key risk to Eskom business and our liquidity.

“As you know that distribution collects the money but then pays that onto transmission and generation, so the problem is not just a distribution problem but an Eskom problem on the whole,” Naidoo told the committee.

He explained that many municipalities are unable to pay current bills or reduce existing debt.

“The municipalities are also plagued with high energy losses in the sense that energy is either being stolen through illegal connections, meter tampering or inaccurate billing.”

Watch the meeting below:

Naidoo added that a decline in electricity demand was further reducing revenue, while weak financial management practices continue to exacerbate the situation.

Of the 71 municipalities enrolled in the Eskom debt relief programme, 62 have been unable to meet the necessary conditions to qualify for debt write-offs.

At least R55 billion in debt could have been written off had these municipalities complied.

“We have seen a rapid growth and much faster growth in terms of municipalities defaulting.”

Among the top 10 non-compliant municipalities are Mbombela (Mpumalanga), Maluti A Phofung (Free State), Govan Mbeki (Eastern Cape), Emfuleni (Gauteng), and Msunduzi (KwaZulu-Natal).

Collectively, they account for R50 billion of the municipal debt.

“The sad situation we find ourselves in is that even municipalities that were approved did not even honour their current bill, some of them from month one of the programme.”

Metros contributing to rising Eskom’s municipal debt

From March 2023 to April this year, municipal debt increased by R15 billion.

Metropolitan municipalities are also showing a debt rising trend at R11 billion.

The City of Tshwane and City of Johannesburg accounted for R10 billion of the total.

“Initially, we did not have an issues with metros in terms of payment. Yes, there was some debt outstanding, but they would generally pay us late and would catch up.

“But from March 2023, you can see that the debt has grown from R1.7 billion to R11.1 billion,” Naidoo explained.

He said Tshwane has a five-year payment plan with Eskom. A four-year similar deal was signed with Coty of Joburg recently.

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