Eskom to provide relief to municipalities whose debt is ‘unaffordable’ – with conditions

Mashatile says there will be consequences for municipalities that fail to use their allocated funds effectively.

Deputy President Mr Paul Mashatile responding for the first time to oral questions from Members of the National Assembly on 23 March 2023. Picture: Parliament of RSA/ Twitter

To help municipalities cope with the growing electricity debt, Eskom plans to provide incentivised relief to municipalities whose debt is unaffordable.

This was announced by Deputy President Paul Mashatile during his maiden oral replies in the National Assembly on Thursday.

Mashatile was responding to a question from ANC MP Sahlulele Luzipo, who had asked about the financial and technical interventions, including the reduction of debt owed by municipalities, by the government to restore Eskom.

The appointment of Kgosientsho Ramokgopa as energy minister and the declaration of the National State of Disaster were some of the interventions, said Mashatile.

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“Government has on numerous occasions acknowledged the negative effects of load shedding to all citizens and the economy. This acknowledgement has found expression in the president’s decision to appoint a minister of electricity in his office specifically to respond to this function,” said Mashatile.

“The minister is tasked to work with the board in implementing the national energy plan. In addition to this intervention is the declaration of National State of Disaster to ensure that there are measured interventions.”

Municipalities’ debt to Eskom

Mashatile said the new energy ministry would also work with the National Treasury and municipalities to facilitate payment of outstanding monies owed to Eskom.

“As outlined in the budget speech in February this year, the National Treasury is working with Eskom to provide a sustainable solution to the crisis of municipal debt,” said Mashatile.

As of end of December 2022, municipalities owed Eskom R56.3 billion, “and the debt is rising”, he said.

“It is clear that we need a debt relief strategy that will acknowledge the inherent risks of unviable municipalities.”

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Eskom will provide incentivised relief to municipalities whose debt is unaffordable, however, the relief will come with conditions that will ensure there is no repeat of debt build-up over time.

Some of the conditions will include the installation of prepaid meters to correct non-payment and operational practices in the affected municipalities, said Mashatile.

“Municipalities must use the money they are allocated effectively and efficiently for the intended purposes. If this is not the case, there should be consequences.

“The culture of non-payment, not only by municipalities, but all organs of state and individual households customers is concerning. We cannot over emphasise the need to discourage a culture of non-payment of public services.”

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The National Treasury is also preparing a municipal finance management act circular dealing with the relief strategy regarding municipal debt owed to Eskom, which is expected to be released later this month, with the implementation expected to start on 1 April, he said.

Government’s debt relief

Another intervention, according to Mashatile, is the government announcement to take over Eskom’s debt.

In his budget speech in February, Finance Minister Enoch Godongwana announced government would take over Eskom’s debt of R254 billion to restore the power utility’s financial viability.

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“This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term,” said Godongwana at the time.

“Second is a direct take-over of up to R70 billion of Eskom’s loan portfolio in 2025/26.

“Government will finance the arrangement through the R66 billion baseline provision announced in the 2019 Budget, and R118 billion in additional borrowings over the next three years.”

Eskom’s R254 billion debt relief means government will service Eskom debt obligations for the next three financial years (both debt capital and interest).