Eskom agrees to partially release municipality's frozen funds to assist with running costs

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A electricity pylon.
A electricity pylon.
Getty

Following the successful attachment of the bank account belonging to the Maluti-a-Phofung Local Municipality in the Free State earlier this week, Eskom and the municipality on Friday reached an agreement to partially release some of the funds to assist the municipality to meet its running costs.

As part of the agreement, which has been made an order of court, the parties must conclude an agreement on or before 07 August 2020, to address the municipality's R5.3 billion debt to Eskom and to service its monthly current account.

The debt goes back to October 2013.

Outstanding debt owed to Eskom by South African municipalities totalled R30.9 billion as at end June 2020. The non-payment of services has been cited by Eskom as one of the main areas affecting its revenue collection, further impacting its infrastructure expenditure as well as the maintenance of its aging fleet of coal-fired power stations.

Eskom said in a statement on Saturday that it has agreed to release R90 million to allow the Maluti-a-Phofung municipality to pay the salaries of its workforce and to meet other running costs.

The bank account currently has a balance of more than R220 million, and was attached by Eskom on 21 July 2020 in execution of a court order granted in 2018 to help Eskom recover unpaid debt by the municipality.

The account balance will remain attached until a repayment agreement that meets Eskom's requirements has been concluded, or until the court orders otherwise. This step on the part of Eskom is a result of the repeated failures by the municipality to adhere to its payment obligations to Eskom for the bulk supply of electricity.

Eskom said it will continue to explore all available legal avenues to ensure that outstanding municipal debt is recovered and that municipalities have a responsibility to fulfil their financial obligations for the bulk supply of electricity.

Maluti-a-Phofung, which has in recent months been hit by violent community protests over poor delivery of services, is not the first municipality that has landed in trouble with Eskom. Assets of Emfuleni Municipality were in March seized by the company over unpaid debt after it obtained a court order for the action.

The parties later reached an agreement, leading to a temporary suspension of the order, with Emfuleni committing to pay R50 million of its R1.8 billion historical debt.

Eskom in March revealed the only Gauteng province municipalities that are not indebted to it were Ekurhuleni, the City of Tshwane, Midvaal and Lesedi.

* Additional reporting by Sibongile Khumalo.

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