Eskom confirms plans for municipalities to take over debt-ridden townships

Eskom has confirmed it is in talks with the City of Johannesburg to sign a municipal debt deal with including a takeover of the distribution of electricity in townships facing over R7 billion in utility debt.

The utility has also signed the first of dozens of debt deals in the pipeline in KwaZulu-Natal’s uMsunduzi Municipality.

This follows new Johannesburg Mayor Mpho Moerane announcing that a memorandum of understanding MoU between Eskom and City Power has been drafted as of last week.

“Eskom can confirm that it has been approached by the City of Johannesburg with a view for the municipality to take over the distribution of electricity in areas of the municipality where Eskom is the distributor,” said Eskom spokesperson Sikonathi Mantshantsha.

Although the CoJ made it seem like a done deal pending public participation, the national power utility is far more measured in how it describes ongoing negotiations over the MoU.

“Exploratory talks are underway, and at an appropriate time as the talks advance, ESKOM will ensure all affected stakeholders are part of the engagements. Any eventual deal will of course be subject to the relevant regulatory processes,” said Mantshantsha.

Also Read: Joburg to take over Soweto power supply, R7 billion Eskom customer debt

Debt deals on the cards

Eskom is also in talks with municipalities where the utility intends on taking over the management of power infrastructure where services have been interrupted by maintenance problems.

Eskom is in discussions with about 50 municipalities who have problems collecting revenues from their own customers, and in turn aren’t able to service their obligations to Eskom.

According to Mantshantsha, the aim of these partnerships is for Eskom to help rebuild the capacity of municipalities to deliver electricity services and to collect payments.

“Municipalities can’t maintain reliable distribution infrastructure. Eskom is offering to assist by taking over the management of the electricity infrastructure and building administrative capacity so they can get the revenue in, and to maintain infrastructure.”

So far the utility has signed an agreement with the uMsunduzi municipality in KZN, which has appointed Eskom to perform some of these functions.

Talks with other municipalities are ongoing.

Also Read:Why Nersa wants an overhaul of Eskom tariffs

Eskom’s infrastructure/debt dilemma

Power industry analyst Professor Samson Mamphweli says its unlikely this plan could work for other municipalities outside the country’s metros, which have a better track record on Eskom debt repayments. He says the challenge is that municipalities always default on payments, while big metros are less delinquent with debt.

“It’s not risky for City of Johannesburg to take over the distribution of electricity in areas where Eskom is currently distributing. Municipalities currently owe Eskom more than R30 billion,” says Mamphweli. “That’s why the amendment of regulations allowing municipalities to buy electricity directly from IPPs (independent power producers) only allow municipalities that are in good financial standing. That’s meant to reduce the risk of defaulting.”

CoJ used to own the Soweto distribution network in the pre-1985 Apartheid era. It was later handed over to Eskom, an an entity which was perceived as politically neutral during a time when payment boycotts became rampant in the township.

“I personally doubt municipalities can get everyone to pay. The power is far too expensive, and the culture of non-payment is entrenched. But it would be politically expedient in order to clean up Eskom’s non performing debtors, and improve Eskom’s balance sheet,” says energy expert Ted Blom.

But communities such as Duduza in Ekurhuleni have complained that Eskom has failed them in managing power infrastructure in the municipality.

On its campaign trail, Action SA recently engaged with the community, which revealed Eskom has left 500 households without access to electricity for 5 months following the explosion of a substation supplying power to the area.

Instead of repairing the substation, Eskom apparently changed meter boxes in the area while refusing to restore power to the community. The community suspects foul-play on the part of Eskom, because the installation of the meter boxes were never explained to them.

Power has since been restored to the area, which ActionSA Mayoral candidate, Thlogi Moseki takes full credit for.

“ActionSA will be filing a Promotion of Access to Information Act (PAIA) application to Eskom to begin getting to the bottom of these allegations,” says Moseki.

ActionSA Mayoral Candidate, Thlogi Moseki, has committed to continual engagements with the community on their grievance regarding the stable provision of power to the area.

• Simnikiweh@citizen.co.za