Most councils fail to meet Eskom debt-relief conditions

Financial position will worsen if removed from the programme

Jeanette Chabalala Senior Reporter
Emfuleni is one of the poorly run municipalities in Gauteng and has been struggling to collect revenue from customers.
Emfuleni is one of the poorly run municipalities in Gauteng and has been struggling to collect revenue from customers.
Image: Thulani Mbele

Only 10 of the 63 municipalities that are part of the Eskom debt-relief programme are complying with its requirements.

This was revealed in the auditor-general’s 2023/24 local government audit report, which said 53 (84%) of the municipalities are not complying with the requirements. 

The AG described the financial health of municipalities as again being in a bad state. 

“Noncompliance undermines the programme’s goal of promoting good financial management practices, which leads to ongoing mismanagement and negatively affects service delivery,” the report reads.

“It may also result in the financial position of these municipalities worsening if Eskom removes them from the programme.”

In 2023, the National Treasury introduced support to relieve municipalities of debt to Eskom, but to benefit they were required to comply with certain conditions once approved in the programme. 

According to the AG, the conditions include that the municipality implement proper budget, expenditure and revenue management processes by paying Eskom within 30 days of receiving invoices for current billing.

Municipalities should also have a funded budget and cost-reflective tariffs, among other conditions.

The AG said those who do not comply with these conditions may be removed from the programme or be compelled to repay their Eskom arrears, interest, and penalties and be subjected to stricter reapplication requirements.

“Eskom may also take legal action against them, including freezing municipal bank accounts,” the report states.

"[...] participating municipalities run the risk of not receiving the full benefit of this initiative due to noncompliance with the programme conditions. Municipalities’ financial difficulties have a detrimental effect on their ability to deliver basic services to their residents.”

Prof Pundy Pillay from the School of Governance at Wits University said the reason the municipalities were struggling to comply was because most of them were “disadvantaged and have poor quality of human resources, and in many cases, the councils themselves are hardly literate”.

disadvantaged and have poor quality of human resources, and in many cases, the councils themselves are hardly literate
Prof Pundy Pillay

“Municipalities can’t collect revenue because invariably, people are too poor to pay, and when people can pay, the municipality is incompetent in terms of its effectiveness in collecting. This is what the AG picks up – these are dysfunctional municipalities.

“They [municipalities] do not have enough qualified people in the three spheres of government. There are not enough people to really effectively run municipalities, so you end up with weak people, and [though] some may be committed, they just don’t have the skills to run the municipalities.” 

DA MP Mark Burke, who is part of the finance standing committee in parliament, said the state of municipal finances was a serious concern for residents and for the national fiscus, which ultimately picks up the bill.

“We need to urgently not only pay lip service but accelerate large reforms in local government finances,” he said.

Asked to comment on the noncompliance, Eskom spokesperson Daphne Mokoena directed media enquiries to the National Treasury, as the programme was a national initiative it administered.

We need to urgently not only pay lip service but accelerate large reforms in local government finances
DA MP Mark Burke

According to the AG’s report, municipalities such as Emalahleni in Mpumalanga had adopted an unfunded budget for the past three years and ended the 2023/24 financial year with a deficit of R1.14bn. 

“The municipality has written down 92% of the debt owed to it by consumers, while also owing Eskom R9.1bn. It has enrolled in the Eskom debt-relief programme, but is not meeting the programme requirements due to cash flow and debt-collection challenges,” the report said.

“The municipality has had a mandatory financial recovery plan in place for more than six years, but this has had minimal impact on its financial health.” 

The report said the Emfuleni municipality in Gauteng had adopted an unfunded budget for the past three years and, in 2023/24, it had a deficit of R987m.

“The municipality owes Eskom R2.2bn and has enrolled in the Eskom debt-relief programme. However, it did not fully comply with the programme requirements in 2023/24 due to financial constraints, largely because it could not collect the debt owed to it.”

Speaking to Sowetan, Emfuleni MMC for finance Hassan Mako said the municipality was constantly working with Eskom. 

“As far as we are concerned, we don’t have issues with Eskdm,” he said. “We received the R1,9bn debt write-off. We are waiting for the new financial year, and we are confident we .will receive a second debt write-off as per our working relationship.”

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