Mid-term budget policy: Government to supply support package to relieve debt-ridden municipalities
As of August 31, the Tshwane metro had accumulated debt of R3.2-billion to Eskom, which left the power utility fuming over the growing debt.
The national government will relieve some of the financial burden placed on municipalities with a support package.
This package is for municipalities indebted to Eskom.
Finance Minister Enoch Godongwana announced this on Wednesday, while delivering his Mid-Term Budget Policy Statement.
The Eskom Debt Relief Amendment Bill aims to write off billions owed to Eskom by cash-stripped municipalities.
Godongwana said the government received several applications from such cash-strapped municipalities to have their debt, totalling R56.8 billion, written off.
He said the debt-relief arrangement outlined in the budget showed a large proportion of outstanding municipal debt is owed to Eskom.
“On application by the municipality, the debt to Eskom up to March 31, 2023, will be written off over three years, in equal annual tranches.”
Tshwane is one of the several municipalities owing the power utility billions. As of August 31, it had accumulated a debt of R3.2-billion to Eskom, which left the power utility fuming over the growing debt.
The minister said municipalities must comply with certain conditions.
“These conditions include enforcing strict credit controls, enhanced revenue collection and up-to-date payments to Eskom’s monthly current account.”
Godongwana said the bill set out to enhance the enforceability of conditions agreed under the debt relief agreement.
“It provides for the payment of interest by Eskom on amounts advanced as part of the debt relief loan; the amendment also provides for the reduction of the amount of debt relief available to Eskom, in the event that the entity does not comply with National Treasury conditions.”
He promised the financial allocations to Eskom would be used for their intended purposes.
“The allocations to Eskom would be accompanied by strict conditions to ensure public funds are used for their intended purpose.”
Godongwana said 28 applications from municipalities seeking debt scrapping have been approved; the remainder are being assessed and verified with provincial treasuries.
“The ultimate goal is the profound transformation of these municipalities, by empowering them to build financial resilience, amplify their capacity to generate sustainable revenue, and rekindle a culture of paying for services rendered.”
He said the economic outlook over the medium term remains weak, reflecting the cumulative effects of power cuts.
Godongwana said the country had experienced more power cuts this year up to September 2023 than in the whole of 2022.
“However, over the medium term, additional generation capacity from renewable energy investments combined with the return of Eskom’s units that are out of service should curtail power cuts.”
He said the electricity system was undergoing an enormously positive transformation.
“We are reaping the fruits of our efforts to reform the electricity sector, including the easing of restrictions on self-generation and encouraging private investment in the area.
“At the same time, we recognise the potential loss of revenue due to private electricity generation, and the fact that traditional revenue models relied on by public entities like Eskom, face serious disruption,” concluded Godongwana.
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