Worst run municipalities will have debt to Eskom written off

Some of SA’s worst run municipalities will have their debt to Eskom written off while others are waiting to hear if the National Treasury will approve their debt relief applications.

Two of the top 10 most indebted councils to Eskom – Emfuleni and Emalahleni – which have been defaulting on their payments confirmed on Wednesday that their debt relief applications were successful. Another two defaulting municipalities – Lekwa and Matlosana – said they were still awaiting a decision on their debt relief requests.

Finance minister Enoch Godondwana announced during his medium term budget policy statement yesterday that 67 municipalities had applied for debt write off as of March. He said 28 councils had already been approved for this debt relief, adding that the municipalities’ debt to Eskom up to March 31 would be written off over a three-year period in equal annual tranches. 

Troubled Emfuleni municipality in Gauteng and Emalahleni in Mpumalanga owe Eskom a combined R13.3bn,  which they have been battling to contain for years.

Emfuleni municipal spokesperson Makhosonke Sangweni said their application was approved three months ago. 

“The municipality and Eskom need to agree on whether the municipality meets conditions such as enforcing strict credit controls, enhanced revenue collection, and up-to-date payment of the Eskom monthly current account. We were given six months to finetune the agreement between ourselves and Eskom. 

“The municipality applied for this relief because the debt was escalating, and we were not able to pay the historic debt. This was worsened by poor revenue collection as a result of some residents who do not pay for rates. More than 80% of the municipality’s residents don’t pay for the basic services they use everyday,” said Sangweni.

The municipality has had a history of nonpayment with Eskom, which often ended up in courts resulting in its bank accounts being frozen and leaving it unable to pay its workers. 

Emalahleni municipality spokesperson Lebo Mofokeng said the council’s application had been successful.

“We are currently implementing the Circular 124 project to ensure that the municipality has stricter credit control to generate adequate funding to sustain their operations,” said Mofokeng.

The municipality has the biggest debt with Eskom, which currently sits at R7.4bn. 

Lekwa local municipality municipal manager Malusi Lamola said their application was made last month and they were still awaiting the verdict. He said the municipality was struggling to collect revenue from its customers, crippling the municipal coffers.

“Electricity is the biggest revenue driver but what we spend and what we collect from customers are two completely different things. Some people do not have the money to pay but here is a long-standing history of nonpayment even among those who can afford to pay.

“We are installing smart meters to have residents pay for the service before they use it. We've done about 6,000 and we have a long way to go but smart meters help reduce the issue of revenue collection and also deal with the element of electricity theft as they are tamper proof and we would be alerted should anyone try to temper with them,” said Lamola.

Godongwana  on Wednesday said the department was reviewing and verifying dozens more applications. He said applications submitted by municipalities totalled R56.8bn or 97% of total municipal debt owed to Eskom at end-March.

“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. 

“This is provided the municipality complies with set conditions. These conditions include enforcing strict credit controls, enhanced revenue collection, up-to-date payment of Eskom monthly current account... These municipalities need to introduce prepaid meters so that everyone pays, otherwise this debt relief won’t be useful,” Godongwana said. 

Joe McGluwa, DA constituency head in Matlosana in North West, said he was aware that his municipality had applied for the relief but wasn't aware how far the process was. 

“It’s a good thing for them to seek relief but my worry is that the people of this place have a culture of not paying and we'd find ourselves in the same position we are in today years after treasury has paid our debt,” said McGluwa.  

sibiyan@sowetan.co.za