Two other metros fight to pay Eskom

Eskom has confirmed that Tshwane is not the only one of the country’s eight metros struggling to pay its bill from Eskom for bulk power purchases.

Mangaung, currently in administration, was unable to pay the payment due at the end of August and is currently in negotiations with Eskom, while Ekurhuleni is only paying its bills partially on time and paying the balance two weeks late, according to Eskom.

This is bad news for Eskom, which saw outstanding municipal debt fall from 44.8 billion rand in March to 49.1 billion rand in July.

So far, Eskom’s battle for its money has been, albeit widespread, limited to smaller municipalities where the amounts at stake are not as large as in large metros.

Indications are that the number of defaulting Metros could rise, however, as they increasingly struggle to collect consumer debt and run out of cash.

Eskom’s finances are crumbling under a debt of nearly 400 billion rand. He is pinning his hopes on government relief to reduce his debt by at least half, which is all he can afford to pay back.

President Cyril Ramaphosa said when announcing a contingency plan to end load shedding that Finance Minister Enoch Godongwana was working on a proposal. It is expected to make an announcement in this regard in October, when it presents its adjustment budget (the medium-term fiscal policy statement).

Read: Finally: CR throws the kitchen sink into load shedding

On Wednesday, Tshwane had missed the deadline to pay Eskom the 1.6 billion rand due for bulk purchases in July, with a total of 1.2 billion rand still unpaid.

This is despite a collection blitz earlier this year when city officials cut power to a large number of business premises and government buildings where their city accounts were behind.

Last week, Eskom rejected a payment plan offered by the city of Tshwane, saying it would press ahead with legislative steps towards disconnecting the capital.

Read: Eskom threatens to cut power from Tshwane

Tshwane MMC for Finance, Peter Sutton, hit back, saying the disconnect would be illegal and the city is ready to get a court order to stop it happening.

Meanwhile, business group Sakeliga and civil rights group AfriForum have both written to Eskom, warning against such drastic action. Both have indicated that they are ready to go to court to prevent Eskom from cutting off the city’s power supply.

Leon Claassen, an analyst at Ratings Afrika, said that in the financial year ended June 30, the city made a net profit of almost 10% on electricity sales. He asks why it was not used to pay Eskom.

There is no hope that the national treasury will bail out Tshwane because the state coffers are also empty, says Claassen.

Independent Councilor Advocate Werner Zybrands is also surprised at the large amount Tshwane appears unable to pay.

Zybrands says the money had to be used to pay for other expenses and points to the notoriously high payroll in most municipalities.

According to data obtained by the Rapport newspaper, Cape Town is the only metro where the rate at which residents pay their municipal bills and the amount of cash available to the city show financial viability.

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Buffalo City collected less than 60% of its outstanding debt in July, well below the 95% benchmark set by the National Treasury. In a recent statement, Mayor Xola Pakati pleaded with residents to quickly pay their municipal bills. He said some capital projects have been halted due to pressure on the subway’s cash flow.

Buffalo City and Nelson Mandela Bay still have cash reserves, but they will run out sooner rather than later due to poor debt collection, Claassen says.

eThekwini, on the other hand, reported a recovery rate comparable to that of the benchmark, but its cash reserves are too low to cover even its operating expenses for a month.

No recent data has been made public by the city of Joburg, as it has not yet presented its financial statements to the council.

Dawie Roodt, chief economist at Efficient Group, explains that when payment levels deteriorate beyond a certain point, non-payment becomes embedded in the culture, as is the case with TV licenses and electronic tolls.

“It’s happening now in municipalities,” he says, adding that it can only be rectified with sustained draconian collection efforts.

He says he sees big problems ahead for Eskom, as well as for the water boards that supply bulk water to municipalities.

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