Home Business More than 60 Municipalities Apply for Government Debt Relief for Unpaid Eskom Electricity Services

More than 60 Municipalities Apply for Government Debt Relief for Unpaid Eskom Electricity Services

by Central News Reporter
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Eskom

In a recent announcement during the delivery of the Medium Term Budget Policy Statement (MTBPS), Finance Minister Enoch Godongwana revealed that over 60 municipalities in South Africa have applied for the government’s debt relief arrangement.

These municipalities owe Eskom, the state-owned power utility, for unpaid bulk electricity services.

According to Godongwana, as of October 2023, a total of 67 applications had been submitted, amounting to a staggering R56.8 billion, which accounts for 97% of the total municipal debt owed to Eskom as of March 2023. Out of these applications, 28 have already been approved, while the rest are currently being assessed and verified by provincial treasuries.

The debt relief program was introduced earlier this year to provide support to struggling municipalities that are unable to pay their electricity bills. The program outlines that the debt owed to Eskom will be written off over a three-year period, in equal annual installments. However, this relief is contingent on the municipalities complying with certain conditions, including enforcing strict credit controls, enhancing revenue collection, and ensuring up-to-date payment of Eskom’s monthly current account.

The primary objective of this initiative is to facilitate the transformation of these municipalities by empowering them to build financial resilience, enhance their ability to generate sustainable revenue, and promote a culture of paying for services rendered.

To further strengthen the enforceability of the debt relief agreement between the government and Eskom, Godongwana also tabled the Eskom Debt Relief Amendment Bill during the MTBPS.

 

The proposed bill includes provisions for the payment of interest by Eskom on the amounts advanced as part of the debt relief loan. It also allows for the reduction of the debt relief available to Eskom if the entity fails to comply with the conditions set by the National Treasury.

The extended MTBPS indicates that the R254 billion Eskom debt relief has been incorporated into both the balance sheets of the government and Eskom. As of September 2023, the government has disbursed R16 billion of the allocated R78 billion for debt relief in the 2023/24 fiscal year.

 

A task team comprising officials from the National Treasury, the Department of Public Enterprises, and Eskom has been established to monitor compliance with the conditions and report quarterly on Eskom’s eligibility for the conversion of the loan to equity.

The debt relief arrangement aims to alleviate Eskom’s financial challenges, allowing the utility to undertake essential maintenance and investment projects and improve its overall financial position.

However, the policy statement also highlights that Eskom’s financial sustainability remains at risk due to poor generating plant performance, declining sales, tariffs that do not reflect costs, rising municipal arrears, and high debt-service costs.

 

 

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