Municipalities respond positively to Eskom debt relief arrangement

More than 60 municipalities have submitted applications for Eskom debt relief arrangements as at last month.

Finance Minister Enoch Godongwana said they had received a total 67 applications, after government had invited municipalities to apply for debt relief to cover its arrears owed to Eskom up to March 31.

The plan is to write off the debt over a three-year period, provided that municipalities comply with the set conditions that include enforcing credit control and collecting revenue to pay bulk expenses such as electricity and water and the up-to-date payment of Eskom’s monthly current account.

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

Godongwana said addressing the Eskom problem without dealing with the municipal non-payment and uptake of debt relief programme would have been counter-productive.

“The debt-relief arrangement for Eskom outlined in the 2023 Budget noted that a large proportion of outstanding municipal debt is owed to Eskom.

“By October, 67 applications had been submitted, totalling R56.8 billion or 97% of total municipal debt owed to Eskom at end-March,” he said.

Godongwana also said 28 applications had been approved.

“The remainder are being assessed and verified with provincial Treasuries,” he 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,” he added.

Speaking to the media at a briefing before tabling the MTBPS, Godongwana could not say which municipalities had made the applications.

However, he noted that the number of applications received for the debt-relief was impressive.

“In terms of the quantum, it is almost 96% of the Eskom debt,” Godongwana said.

Meanwhile, the MTBPS noted that economic activity remained severely limited by continued shortages of electricity, deteriorating freight rail performance and slow port operations.

“Power plants previously affected by unplanned maintenance and breakdowns are starting to return to operation. Equally important is the continuing unbundling of Eskom and revised regulations that will de-monopolise the power grind,” the budget statement read.

Godongwana said arrangement contained strict conditions.

Of the Eskom debt amounting to R254bn, the government has disbursed R16bn of the R78bn for 2023-24.

In addition, he added that he may reduce the amount of debt relief available to Eskom going forward.

Government has also decided to convert the loan from interest-free to interest-bearing to better reflect the cost of this arrangement, he said.

According to the minister, amendments to the Eskom Debt Relief Act would be tabled to provide for the interest conditions and to empower him to reduce the amounts from future allocations.

Cape Times