By: Daily Investor 

Ramokgopa referred to South African municipalities owing Eskom R78 billion, which is increasing at an alarming rate.

He said this problem must be urgently addressed to protect the power utility’s ability to fulfil its mandate.

He said a large chunk of this debt is irrecoverable. “There’s no possibility under the sun that we will collect that R78 billion,” he said.

Eskom needs this money to reinvest in its infrastructure and perform maintenance to improve its generation fleet’s performance.

“Municipalities must pay that money. However, on an objective ground, they simply don’t have the means to pay,” he said.

Ramokgopa said the current debt trajectory owed to Eskom threatens the power utility’s future existence.

“To give you the magnitude of the problem, if we don’t resolve it, our projection is that at the current rate, by 2050, Eskom will be owed R3.1 trillion,” he said.

“Eskom will collapse. Generation capacity is going to be compromised. So, we must resolve this problem.”

Ramokgopa said the rising municipal debt burden is the most urgent task Eskom is confronting.

“It is municipality-related, but we can’t fold our arms. We need to help them from a technical point of view,” he said.

He emphasised that continued non-payment is affecting Eskom’s ability to address distribution infrastructure needs – leading to the implementation of load reduction.

Load reduction is implemented in areas when the demand is higher than the infrastructure is able to handle.

“When that distribution infrastructure fails to provide electricity to 50 houses, there’ll be 10 to 20 houses that have been paying diligently, but they are collateral damage,” he said.

“We must protect the interests of Eskom as a going concern and ensure that municipalities can collect revenue.”

“The biggest victims of all of that is the end consumer and, by definition, is the South African economy.”

The Minister said the department, together with municipal leaders, will address the challenge of electricity affordability and access to allow municipalities to collect revenue.

Eskom’s rapidly increasing municipal debt

The Outlier has produced an analysis of Eskom’s municipal debt, and the numbers paint a bleak picture.

Since 2018, the debt owed by municipalities to the national power utility has increased nearly sixfold.

In 2018, municipalities owed Eskom R13.6 billion. Fast forward six years, and the debt ballooned to R78 billion.

Municipal debt increased by R19.5 billion over the last year, more than the total debt in 2018.

Eskom and the Treasury are working with 28 municipalities on a debt relief programme, which collectively amounts to R26.7 billion.

The chart below, courtesy of The Outlier, shows Eskom’s municipal debt increase over the last seven years.