Court ruling boosts Eskom’s drive to collect debt from defaulting municipalities

Eskom’s drive to collect debt from defaulting municipalities has been given a boost by a High Court ruling which rejected a bid by Pioneer Foods to have Eskom’s decision to cut power supply to the Eastern Cape’s Walter Sisulu municipality set aside.

The food producer, which owns brands such as Sasko bread, Weetbix and Spekko rice, is one of the key businesses in the region affected by the decision. It operates a facility in Aliwal North.

In what Eskom described as a “landmark judgment”, the High Court in Johannesburg on Tuesday rejected Pioneer’s application, strengthening the power utility’s ability to collect unpaid revenue.

The municipality is one of the top five defaulters in the Eastern Cape, who owed Eskom a total of R1.3 billion as at end of July.

Eskom is owed over R30 billion by municipalities across the country, and it has in recent months taken control of banking assets of defaulting councils, as well as seizing tracts of land and movable assets of transgressors.

The power generator, whose own debt has spiralled to nearly R500 billion, is battling to stabilise its balance sheet which has contributed to myriad operating problems. The company has also been hit by the rising cost of its power build programme and the syphoning of funds through irregular payments to contractors.

The court lambasted Pioneer for seeking legal relief before exhausting internal remedies available to it, such as lodging a dispute with the regulator, Nersa.

The judgment stated that, Pioneer Foods, as a customer of the municipality, had “no legal right” to bring the case against Eskom to court and detailed how the municipality had since as far back as 2017 had failed to honour engagements with Eskom, including Pioneer’s lack of response to a public notice to affected parties which was published in local media.

The court said the company was “clutching at straws”.

Pioneer Foods is adamant that it had a “compelling case and that the judgment is wrong” and said it was considering its next step.The company, which employs about 130 people at the Aliwal North mill and its associated depot, stressed that it had diligently paid its electricity bill to the municipality over the years.

“At this stage the electricity remains on, however we clearly can’t run the plant if the supply to the town is cut off due to the non-payment of historic debt owed to Eskom by the local municipality,” the company said.

It said running the mill on standby electricity would not be a viable option given the output requirement of the Aliwal North operation.

In September, Eskom secured farmland valued at R2.5 billion as security for debt owed by Matjhabeng Municipality in the Free State.

In the same month, the bank account of the impoverished Maluti-a-Phofung was seized by Eskom over R5.3 billion debt.

Eskom CEO Andre de Ruyter has stressed that the power utility, which is in the process of implementing it turnaround plan – focused on stabilising the company’s balance sheet and infrastructure maintenance – will intensify its debt collection efforts.

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