Eskom to tighten screws on municipalities

Cape Town – Eskom interim CEO Phakamani Hadebe told Parliament’s portfolio committee on energy that the utility did not anticipate needing a government bailout in the coming financial year to assist it.

He said Eskom had a R72bn borrowing requirement and a finance market that was equal to the request. However, he said due to pressures created by tight tariff increase recommendations by the National Energy Regulator of SA and debtors, particularly municipalities, the utility would have to get tougher on those owing it money.

While former finance minister Malusi Gigaba is no longer at the helm of National Treasury, few expect the returning Minister of Finance Nhlanhla Nene to deviate from the policy that government guarantees are not to be given out to mismanaged state-owned enterprises needlessly.

Hadebe said it was not likely that Eskom would request any additional government guarantees as the finance market had a stronger appetite than before to do business with Eskom.

“For this year we won’t need new government intervention, but we will look at a plan to establish what we need. We will commit to reducing on the cost side of our business. We do not anticipate that we will need a government bailout,” said Hadebe.

The bad news, however, is that Hadebe said it was time to tighten the screws on municipalities that continuously defaulted on their debt to the power utility. Municipalities currently owe Eskom more than R30bn. 

“We have started by responding to non-adherence by cutting off power for four hours. But people are smart and they wake up early to cook dinner before sunrise. But now we have resolved that if they continue to fail on payment, we will extend cut offs to six hours and even to 14 hours,” Hadebe said.

Hadebe said the crisis did not stem from household inability to pay for electricity and was not necessarily the fault of Eskom. He said, as such, it was necessary that a stick be introduced to enforce payment.

“I come from a poor community called Wembezi, in Estcourt in KwaZulu-Natal. Now unemployment and poverty are unbearable there. But people pay. Now if you get to a place like Soweto with more opportunities and it’s a different story. It is clear that the problem is not with Eskom,” he said.

"It must be noted that the municipal debt crisis does not necessarily stem from household consumers refusing to pay, but in many cases stems from the absence and inefficiency of municipalities’ revenue collection measures, as the vendors of power supply to these communities."

In any event, Eskom acting CFO Calib Cassim said, Eskom’s debt stood at a figure R367bn, much of which is guaranteed. He said in light of this, there was no anticipated need for Eskom to come to government and National Treasury seeking any fresh guarantees.

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