In a checkmate move Eskom has moved to interrupt bulk electricity supply to the top 20 defaulting municipalities across the country from June 5.
Two weeks ago, on March 31, the total municipal arrear debt greater than 30 days was R4.6-billion. Of this amount, the top 20 defaulting municipalities are currently indebted to Eskom to the amount of R3.68-billion for the bulk supply of electricity.
Emalahleni owed Eskom R550-million in January.
A letter of demand on arrears accumulated since October 2014 was received by the municipality on March 6.
“Non-payment for electricity undermines Eskom’s statutory obligation to generate and supply electricity to municipalities nationally on a financially sustainable basis. We have therefore decided to exercise our right according to the provisions of the Electricity Regulation Act 4 of 2006 and the supply agreement with municipalities, which entitled us to disconnect the supply of electricity to defaulting municipalities,” interim Chief Executive of Eskom, Mr Zethembe Khoza said.
To put a bright red cherry on top of this slice of cake, the National Treasury issued a press release announcing that it is withholding transfers of equitable share funding to 60 municipalities, which also includes Emalahleni Local Municipality. This they are doing because municipalities failed to honour their financial commitments including paying the struggling power utility, Eskom.
The equitable share is an unconditional grant that enables municipalities to provide basic services to poor households, and to enable municipalities with limited own resources to afford basic administrative and governance capacity and perform core municipal functions.
Many qualify for free basic services, which are subsidised by the equitable share.
South Africa Local Government Association (Salga) has called on municipalities to immediately implement credit control measures to recover debt from government.
Nationally municipalities are owed over R90-billion for services such as water, sanitation, electricity and waste management.
About R5.4-billion of this debt is owed by national and provincial government.
Locally, government owes the City of Coal close to R100 million.
Salga wants its members in municipalities to immediately implement credit control measures to recoup monies owed by government.
The National Treasury says transfers will only be released to the municipalities once requirements as communicated to municipalities are met.
Emalahleni’s Acting Municipal Manager Mr Theo van Vuuren said, “The situation is indeed serious. As municipality we have been getting further into arrears as a result of two factors. The first factor is the more than 40% of electricity we purchase from Eskom and cannot bill to customers. The bulk of these are in respect of illegal utilisation of electricity by various categories of consumers, including illegal connections in informal settlements to theft of electricity by customers and businesses who bypass electricity meters. The second aspect is the huge amount of arrears which developed over years by government, businesses and consumers. At this stage more than R1.5-billion is owed by them to the municipality. With payment rates on average last year at 72% these areas further increased. This in practise means that the municipality is not receiving sufficient revenue to cover its electrical account from Eskom.”
Van Vuuren said the municipality has started more than a year ago to roll out more electricity meters to cover the gap as well as to address illegal utilisation. To date these processes have been positive but have not gained sufficient momentum to turn the situation around.
“A two pronged strategy is now been employed to rectify the Eskom account in a sustainable manner and over the next few weeks you will see a much more aggressive approach in recovering arrears owed to the municipality,” the man holding the city’s reins warned.
“As first step the outstanding government debt needs to be recovered and I am positive that this is possible before the cut off date by Eskom. Secondly a process to verify all business accounts and put arrangements in place to ensure repayments of the estimated R160-million owed to the municipality has commenced since late last year and over the next few weeks will be intensified,” he said.
Van Vuuren said communities will be visited to address both issues of arrears and illegal connections. Communities owe the municipality more than R1-billion.
“The second leg of the strategy is to fast track at large scale the installation and replacement of electrical meters. These meters with protective structures will ensure a wider revenue base as well as less theft and is to my mind critical to prevent the same situation as now to reoccur. Further announcements in this respect will follow,” said Van Vuuren.
Finally Van Vuuren urged the community of Emalahleni to be cooperative and to assist in the solution as together the crisis can be averted in a way which will also positively change the municipal financial status and allow more investment in infrastructure.
