Eskom Soweto

Soweto, South Africa / Image via Flickr: arboresce

Soweto owes Eskom R17 billion, half of the total national debt

How is Eskom going to increase its financial yield while still struggling to retrieve the R34 billion it is currently owed by defaulting municipalities?

Eskom Soweto

Soweto, South Africa / Image via Flickr: arboresce

Eskom is desperately trying to recoup money owed by municipalities – Soweto, in particular, is making that task all the more difficult.

Eskom, South Africa’s national electricity provider, had an exceptionally shocking year in 2018. Financial losses reached dismal new depths. Irregularities, both fiscally and operationally, left the state owned enterprise floundering in the doldrums of gross incompetence. Dubious coal shortages, failed maintenance plans, industrial action and the lingering stench of corruption only added to Eskom’s woes.

Eskom looks to recoup its losses

Inevitably, Eskom’s problems become the problems of South African citizens. The much-loathed load shedding schedule made an ominous return. This year, the knock-on effects of ineptitude will be felt the hardest, as the power utility looks to increase the cost of electricity by at least 15%.

The tariff increase is an attempt to rebuff financial failings – to increase revenue. Never mind the fact that Eskom hasn’t actually increased its operational capacity and that, as a service provider, is teetering on the brink of failure – there’s a bigger issue pertaining directly to the mooted tariff increases.

How is Eskom going to increase its financial yield while still struggling to retrieve the R34 billion it is currently owed by defaulting municipalities? Surely, a tariff hike will only serve to embattle the compliers and entrench the position of the defaulters?

Soweto and the debt that keeps on rising

Let’s take Soweto as an example. Last year it was reported that Soweto, a part of the City of Johannesburg Metropolitan Municipality, owed Eskom a whopping R15 billion. This was largely due to non-compliance of residents, who have fiercely resisted the installation of prepaid electricity meters. That singular debt has now risen to R17 billion, as confirmed by Eskom’s chief financial officer, Calib Cassim.

To put this into perspective, the five biggest municipal defaulters owe Eskom a total of R7.5 billion. Maluti-A-Phofung Local Municipality in the Free State, alone, owes Eskom R2.8 billion. These municipalities, specifically those defaulting in the Free State, have been hit with forced power outages – Eskom’s debt collection strategy; pay up or power out.

Soweto, although being the most densely populated urban settlement in South Africa, is not a municipality unto its own. Still, Soweto owes Eskom more than double its total national municipal debt. Indeed, this mammoth debt threatens the very stability of Eskom’s already uneasy operational capacity. Cassim explained:

“Rising municipal debt coupled with Eskom’s poor financial and operational performance pose a systemic risk to the sustainability of the company.”

Thys Möller, Eskom’s general manager responsible for customer services, echoed his colleague’s sentiments, noting that, in the last 18 months, municipal debts had risen by 80%, saying:

“Municipal debt continues to rise, and this has become unsustainable. Municipal debt is no longer just an Eskom problem, it is a national problem. Eskom continues to participate in the inter-ministerial task team process with a view of finding lasting solutions together with other stakeholders.”

What is being done to solve the problem?

So serious has the scourge of defaulting municipalities become, that an inter-ministerial task team has been called to action. This task team includes the departments of Co-operative Governance and Traditional Affairs, Energy, Public Enterprises, National Treasury, and the National Energy Regulator of South Africa (NERSA). While the plan of action to recuperate its losses remains shrouded in mystery, the Eskom board has promised swift action against defaulters – including Soweto.

Eskom confirmed that, to date, it had installed 80 000 split prepayment meters in Soweto – the urban hub which houses more than a million residents.