Municipalities owing Eskom R56.8bn apply to participate in debt write-off scheme

Eskom's Megawatt Park

Photo by Creamer Media's Donna Slater

1st November 2023

By: Terence Creamer

Creamer Media Editor


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The National Treasury has confirmed that a total of 67 municipalities, which collectively owe Eskom R56.8-billion, or 97% of the municipal arrears debt of over R58-billion owed to the utility at the end of March, have formally applied to participate in the debt write-off programme.

The National Treasury also confirmed that 36 municipalities had already been approved for participation, but did not immediately indicate what these municipalities collectively owed to the utility.

Earlier in the month, it was reported that 28 municipalities had been approved to participate following the initial closing date for applications at the end of September; a deadline that was then extended to October 31.

Should the remaining 31 municipalities be admitted to the programme, it would represent a major milestone in dealing with a problem that has grown markedly over the past number of years, with Eskom revealing recently that the municipal arrears debt figure had risen to above R65-billion by July.

In his speech to Parliament, Finance Minister Enoch Godongwana said 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”.

The municipal scheme has 14 strict conditions, including that the qualifying municipalities remain up to date with their current account payments over the three years, which Eskom indicated would boost its liquidity over the period.

The utility reported a R24-billion loss for the 2022/23 financial year and expects to report a R23-billion loss this year.

The debt will be written off over a three-year period, in equal annual tranches, provided the municipality complies with the conditions.

Besides keeping current accounts updated, the conditions also include enforcing strict credit controls and collecting revenue to pay for bulk expenses like electricity and water.

Municipalities that fail to meet the conditions will need to repay the remainder of their arrears debt to Eskom, including interest and penalties.

The National Treasury said that the remaining 39 applications were being assessed and verified with provincial treasuries.

It also insisted that municipalities that receive this debt relief would be expected to sustain the improvement in their financial condition.

The municipal scheme was announced in February when Godongwana unveiled a R254-billion debt-relief package for Eskom itself.

The Eskom Debt Relief Act was promulgated in July 2023 and Eskom was required to comply with strict conditions attached to this Act until 31 March 2026.

The National Treasury reported that, as at September 30, government had disbursed R16-billion of the R78-billion for 2023/24.

In the two subsequent years, R66-billion and R110-billion is allocated and a task team has been established with officials from the National Treasury, the Department of Public Enterprises and Eskom to monitor compliance with the conditions and report quarterly on whether Eskom qualifies for the conversion of the loan to equity.

Edited by Creamer Media Reporter




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