Growing municipal debt could lead to Eskom’s collapse, says South Africa’s energy minister

South Africa’s municipalities collectively owe ZAR78bn ($4.3bn) to the state-owned power utility Eskom, SAnews reported on July 8. According to the National Treasury, there is a culture of non-payment for services among consumers, which has led to revenue collection challenges for municipalities.

The issue of growing municipal debt to Eskom must be urgently addressed to protect the ability of the power utility to fulfil its mandate, says Minister of Electricity and Energy Kgosientsho Ramokgopa, who cautions that a lot of this debt is irrecoverable.

“This picture presents problems for Eskom,” Ramokgopa said at a media briefing held in Pretoria. “Eskom needs this money for it to be able to reinvest back into its own infrastructure. Municipalities have to pay that money…but on an objective ground, they simply don’t have the means to be able to pay.”

Ramokgopa pointed out that the current trajectory of the debt owed to Eskom poses a threat to the existence of the power utility in the future.

“To give you the magnitude of the problem, if we don’t resolve this problem, our projection is that at the current rate, by 2050, Eskom will be owed ZAR3.1 trillion,” he stated as quoted by the government’s press agency. “Eskom will collapse. Generation capacity is going to be compromised. So, it’s important that we resolve this question.”

The minister underscored that the issue of the escalating municipal debt was the most urgent task the government needed to address, adding that municipalities required help with debt repayments “from a technical point of view.”

According to Ramokgopa, the continuing non-payment is affecting Eskom’s ability to deal with distribution infrastructure needs, leading to the implementation of load reduction by the struggling power utility.

In a press statement on July 9, the utility announced its decision to implement load reduction in areas of Eskom supply prone to network overloading, as reported by NewsBase.

Eskom explained that during the winter season, there was an exponential increase in energy demand in areas with high levels of electricity theft, by-passing of meters and illegal connections, which caused extreme overloading of the distribution network.

Load reduction will be implemented during morning and evening peak hours when the demand is higher than the infrastructure is able to handle. According to the utility, there are currently around 2,111 transformers which are frequently overloaded across the country at risk of being damaged, with around 900 transformers awaiting replacement.

“In the solution, we must protect the interests of Eskom as a going concern, ensure that municipalities are able to collect [revenue] but also protect the interests of the user,” the minister stated. “Because when that distribution infrastructure fails that is providing electricity to 50 houses, there’ll be 10 to 20 houses that have been paying diligently but they are collateral damage.”

Ramokgopa assured the media that his department, together with municipal leaders, would address the challenge of electricity affordability and access to allow municipalities to be able to collect revenue.

“This can’t continue any further. It’s important that we arrest it so that we are able to ensure that the country is able to achieve its developmental objectives,” he was cited by SAnews as saying.