Minister of Electricity, Kgosientosho Ramokgopa. (GCIS)
MaPower and Energy Minister Kgosientsho Ramokgopa has warned that municipal debt to Eskom is projected to rise to R3.1 trillion by 2050 and, if not resolved, could lead to the power utility's insolvency.
Speaking to media on Monday, Ramokgopa said mismanagement and incompetence at the city level had led to the recent implementation of load shedding, causing power shortages for consumers.
He added that the municipality's ability to repay its debt to Eskom has deteriorated due to failures in revenue collection, illegal connections, theft and reduced electricity sales due to power outages.
“I said the municipality has to pay that money back and they don't have the means to pay that money back,” he said.
“So the solution must not only protect Eskom's interests as a going concern so that municipalities can collect, but also protect the interests of users,” he said.
However, households who pay their electricity bills are at risk of “collateral damage in the form of load shedding” because they are connected to a grid that is behind on its payments.
Ramokgopa said progress was being made in addressing generation and transmission issues, but the current provincial debt of R78 billion was preventing efforts to address distribution issues.
“Eskom needs this money to reinvest in its infrastructure, the municipalities have to pay that money back and they don't have the means to pay that money back,” he said.
Ramokgopa called on defaulting municipalities to repay their debts by forcing residents to make payments. He said he had already discussed municipal debt with Cooperative Governance and Traditional Affairs Minister Velenkosi Hlabisa.
Eskom's head of electricity distribution, Mondo Bala, said: “Load shedding is an intervention we have implemented to ensure that our infrastructure is not overloaded as winter demand exceeds what the grid is designed for. This causes the distribution company to take the preventative measure of load shedding.”
Last month, City Power said it would implement load shedding as a “last resort” but it was necessary to protect the metro's power grid from collapsing.
Last year, City Power spent 80 percent of its fiscal year budget replacing small substations damaged by cable theft and vandalism.
Around 300 small substations are to be replaced by January 2023, at a cost to the municipality of R200 million.
Ramokgopa said unless the municipal debt issue was resolved, people would continue to suffer from power supply problems due to breakdowns in the electricity distribution infrastructure.
Eskom reported in November last year that municipal arrears have risen sharply since 2021, rising from R35 billion in 2021 to R45 billion in 2022 and R56 billion in 2023, before jumping to R75 billion in the first 11 months of the 2023-24 financial year.
To help resolve the non-payment issue, Treasury introduced a local government debt relief package in May last year, allowing local governments to apply to take part in a three-year scheme under which Eskom would be able to gradually write off their debts if the local government could meet 14 conditions, one of which is that they continue to make current account payments to Eskom.
However, arrears continued to rise even after the Treasury Department launched a debt relief program.
Ramokgopa said the tariff hikes were also due to delays in repayments to Eskom, which was increasing the costs for consumers.
“These increases also bring inflationary pressures. When Eskom applies for these tariff increases, municipalities impose additional charges, further increasing the cost of doing business,” he said.
“People will find it [more] It's hard to buy food [already] “We need to do it now. We need to solve this problem quickly.”
He said some businesses have publicly stated they are considering relocating because the infrastructure cannot meet their power demand. This will lead to job instability and migration, which will result in further reduction in revenue for the municipality, Ramokgopa said.