Cash-strained Tshwane demands tailor-made Eskom debt relief
The metro will need to convince the Treasury to grant it relief on its own terms.
Tshwane metro has approached the Treasury for a favourable tailor-made debt relief agreement to cushion its more than R1-billion burden to Eskom.
The metro said the current debt relief scheme is not appropriate for its revenue generation so it was unable to comply with some of its conditions, especially the following:
– Maintain the Eskom bulk current account as a result of the liquidity challenges it is experiencing.
– It was unlikely it would be able to keep Eskom’s bulk account current due to a decline in electricity revenue as a result of illegal electricity connections causing huge distribution losses.
– A limit on its borrowing powers would ultimately affect revenue-generating streams, exacerbate the already strained financial situation and negatively impact capital infrastructure development and service delivery.
– Tshwane wants to be exempted from losing its Nersa licence should it fail to comply with any of the conditions of the relief programme because selling electricity is one of its two main revenue sources.
Tshwane said it was of the view that further engagements needed to be held with the Treasury to see how these conditions could be eased.
Tshwane maintains that it also cannot allow its constitutional mandate to supply electricity to be taken over by the Treasury in its bid to rescue the financially ailing Eskom while it remains liable for interest and penalties on the R3.7-billion it owed the utility.
It attributed this debt to the decline in electricity revenue because of load-shedding and theft.
During this year’s Budget Speech, Minister of Finance Enoch Godongwana announced conditional debt relief for all municipalities that owe Eskom.
It was unclear when the metro submitted its application to join the scheme but The Treasury deadline was September 30.
However, the relief is conditional on the municipalities meeting about 14 conditions.
The full set of the conditions can be found via the following link – MFMA Circular No 124
Motivating for the relief to be granted, Tshwane DDG intergovernmental relations in the city manager’s office Malijeng Ngqaleni said the more than nine months of Covid-19 had left the city with financial scars.
Ngqaleni said during 2020 under the State of National Disaster (SND) and hard lockdown, Tshwane was prohibited from exercising any credit control which undermined its ability to collect more than R3.2-billion due.
She said the relief, if granted would afford Tshwane time to focus on revenue improvement and collection strategies.
Tshwane mayor Cilliers Brink speaking in council said the metro could not afford to lose its electricity distribution network and ability to go out to market to source funding as stipulated in the relief conditions.
“There are certain risks the city cannot afford to take. We must guard these functions assigned to local municipalities and approach Treasury.”
Brink said it was important to ensure they applied for the relief within September as the deadline was fast approaching on the offer.
He said however it was vital that Tshwane negotiated for several conditions to be waived as it had to be less dependent on Eskom to better its financial standing.
Good party councillor Sarah Mabotsa supported the debt relief scheme.
“The long-awaited debt relief is crucial as it will give some reprieve to the metro to deal with Eskom debt in the billions.”
She said the relief would ensure that there was discipline on metro spending.
Mabotsa also suggested Tshwane improve its strategy to ensure national and provincial offices paid their debts.
The sole Republican Conference of Tshwane councillor Lex Middelberg also supported the debt relief package.
He said he was however unsure the Treasury had the remit to agree to Tshwane’s request to take up the debt relief on its own terms as that would set a bad precedent.
“If they [Treasury] are silly enough to agree to Tshwane’s terms, I seriously doubt they will and… places Tshwane’s sought relief as wanting and irresponsible.
“It boggles the mind why this government that brought about this crisis would put debt relief at risk with a presumptuous impertinence.”
He said the conditions of relief were not unreasonable and Tshwane’s rejection thereof was a sure indication that it was not committed to maintaining Eskom’s account.
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