The South African Local Government Association (Salga) says it does not support the proposed active partnering agreement between State-owned utility Eskom and the Maluti-a-Phofung local municipality, in the Free State, which purports to assist the municipality with operational challenges to secure revenue to enable payment of the municipality's bulk electricity account.

Under this arrangement, Eskom intends to take over the electricity distribution function, including all related revenue, out of the hands of the municipality.

Salga believes the distribution agency agreement is only fuelled by one party’s needs and is not sustainable for all parties entering into the agreement. It says the agreement neglects the fundamental fact that electricity is an important funding source for local government.

South Africa’s Constitution lists electricity reticulation as a local government responsibility, and Section 153 places the responsibility on municipalities to ensure the provision of electricity reticulation to communities in a sustainable manner, as well as promote economic and social development.

“We appreciate the challenges faced by some municipalities in discharging their executive and service authority function over electricity. Salga supports that a sustainable and balanced active partnering agreement with Eskom or any entity, which has a capacity to provide the electricity distribution services, be in place to provide sustainable and reliable electricity services to the communities.

"However, Salga strongly feels that the current Eskom distribution agency agreement in its form is not serving the needs of both Eskom and Maluti-a-Phofung equally and fairly,” Salga electricity, energy and public works working group chairperson Tebogo Hlakutse said.

He voiced particular concern over the financial sustainability of the municipality, once Eskom took over the electricity distribution function, including all revenue related to the function.

“The distribution agency agreement also requires the Maluti-a-Phofung municipality to pay back the full debt amounting to almost R6-billion, as well as additional service fees. Further to this, if Eskom were to be appointed to be the service provider on behalf of the municipality, it needs to do so using the process legislated by the Municipal Systems Act, where Eskom as a service provider or agency will be expected to comply to the bylaws of the municipality where credit control, surcharges and other matters relating to electricity services are concerned,” he said.

In Salga’s view, the proposed agreement is fuelled only by Eskom’s need to recover what it is owed by the municipality, without any considerations of the interests and the sustainability of the municipality beyond the active partnering agreement.

Salga said it understood the time limitations and expectations imposed by the court order over the matter, but that it felt strongly that if this agency agreement was going to be a future model for assisting municipalities, it must be done correctly, and should not create unwarranted precedence to the detriment of Maluti-a-Phofung and other municipalities who might want to enter into similar arrangements with Eskom or any other similar entity.

Salga has been involved in the intergovernmental relations discussions, which include the municipality, Eskom, National Treasury and the Department of Cooperative Governance and Traditional Affairs to discuss a sustainable active partnering agreement with Eskom.  

Salga said it had provided advice and defended the municipality against signing an agreement that was unfair and unsustainable, and proposed a process within which this partnering should be finalised.