By Lehlohonolo Lehana.
The National Treasury announced on Tuesday that it has extended the deadline for municipalities to apply for the Eskom municipal debt relief support programme.
In June, the National Council of Provinces approved Eskom’s Debt Relief Bill, which allows the National Treasury to hand Eskom R254 billion over the next three years.
This was part of the government’s effort to free up some revenue in qualifying municipalities owing Eskom to maintain their current bulk accounts and other creditors to provide a reliable basic level of services.
Since 2022, the government has been considering measures to relieve some of Eskom’s R423 billion debt, arguing that the embattled utility cannot reasonably service its debt from its internally generated cash flows.
The bill proposes advances to Eskom, covering capital and interest payments over the next three years.
This will amount to R78 billion in 2023/24, R66 billion in 2024/25 and R40 billion in 2025/26 and R40 billion for the 2025/26 financial year.
The initial closing date was 30 September, but Treasury announced on Tuesday that it had extended the deadline to 31 October 2023 to add more municipalities to the programme.
Treasury says 136 of the 257 municipalities in South Africa owed Eskom R58.5 billion.
So far, 37 municipalities have applied for the relief.
Twenty-eight of the 37 applications have been approved, with 9 of them still being assessed.
“There are 25 additional applications resting with the respective provincial treasury for submission for approval,” said Treasury in a statement.
Earlier this week, Electricity Minister Kgosientsho Ramokgopa urged all three spheres of government to come together and assist municipalities in dealing with Eskom debt and illegal electricity connections.
The escalating municipal debt poses significant risks, including undermining the liquidity of Eskom, Ramokgopa said. “If Eskom is not able to collect money owed by municipalities, this creates a major hole in its revenue, which undermines Eskom’s ability to invest in improving generation, transmission and distribution.”
Writing off debt owed by municipalities now would not solve the root problem, which is the “culture of nonpayment”, said Busisiwe Mavuso, the CEO of Business Leadership SA and a former Eskom board member.
Municipal debt relief could end up being a useless exercise if there is no “fundamental change” in the behaviour of municipalities that will ensure that they keep up with payments in future.
“It doesn’t matter whether the debt that is written off is absorbed by Eskom or Treasury, at the end of the day we are worse off as a country. Writing off this debt will only plunge us into further economic turmoil.”
Mavuso said Eskom is not receiving adequate support from the government to put interventions in place to force municipalities to pay.