Eskom debt interest climbs as Govan Mbeki Municipality battles cash-flow constraints

Govan Mbeki Municipality paid R63m to Eskom in July, a significant increase from the R16m paid in June, but the payment remained insufficient to fully settle the municipality’s current monthly electricity account.

Executive Mayor Nhlakanipho Zuma made the disclosure during a council meeting on August 26, where he reported that severe cash-flow constraints, limited revenue collection and competing operational obligations continued to affect the municipality’s ability to settle its Eskom account in full.

“Included in the Eskom payment of R63m is the equitable share payment of R25m. Limited revenue collection and competing operational obligations prevented the full settlement of the account,” said Zuma.

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Despite the higher payment in July, the interest charged on the municipality’s principal Eskom debt increased to R31.18m, compared with R27.5m in June.

Zuma said municipal management is continuing to prioritise Eskom payments within available funds while engaging the power utility on both historical debt and the management of the current account through the Distribution Agency Agreement (DAA) process.

“As a result, management is implementing revenue collection measures, including credit control implementation, to work towards settling the Eskom current accounts in full,” he said.

The municipality also increased its payment to Rand Water in July. According to Zuma, R82m was paid to Rand Water in July, compared with R73m in June.

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Of the July payment, R50m was from the municipality’s equitable share allocation. The municipality was billed R53m by Rand Water in July, compared with R44m in June.

Zuma further reported that Rand Water had written off R21m in interest in accordance with the Debt Settlement Agreement (DSA).

Despite the payments, the municipality’s debt to Rand Water remained substantial, standing at R847m as of July 31.