Cape Town - Just one municipality out of more than 100 has so far applied for debt relief assistance from the National Treasury, despite billions owed to Eskom.
This came to light during a virtual media workshop on the municipal debt relief circular on Wednesday.
The circular for the 2023/24 medium-term revenue and expenditure framework (MTREF) is part of a package designed to resolve Eskom’s financial and debt crisis.
The circular aims to present a solution to defaulting municipalities’ failure to pay for electricity, and to address the consumer culture of not paying for services.
Last month, the South African Local Government Association (Salga) welcomed the intervention, adding that municipalities owed Eskom R56.3 billion as of December 31 last year, while municipalities were owed R306bn.
The Treasury said it was planning roadshows across the country in an effort to explain the initiative and encourage eligible municipalities to apply for the assistance.
The Treasury’s local government budget analysis director, Sadesh Ramjathan said because municipal Eskom debt was a material risk to the Eskom debt relief, the power utility had approached the Treasury for a solution in January 2021.
He confirmed that 165 municipalities technically qualified for the assistance, yet just one has applied for the relief so far.
“Government’s numerous attempts to rescue the municipal debt spiral has not achieved the desired results – no visible improvement yet. Some municipalities are financially grid-locked, require radical change towards their insolvent trajectory while being mindful that a persistent culture of financial mismanagement behaviour led to their position,” Ramjathan said.
The government’s debt relief to Eskom includes 33 conditions, while municipal debt relief includes 14 conditions for municipalities, relating to sustainable finances and operational and technical best practices.
Eskom will only be able to write off one-third of the municipal Eskom debt if the municipality complies with all the necessary conditions for 12 consecutive months.
The Treasury’s revenue policy co-ordinator, Marli van der Woude, said: “By applying for municipal debt relief the municipality agrees that if it fails to meet the relief conditions the municipality will voluntarily apply to Nersa (the National Energy Regulator of South Africa) to revoke the municipality’s licence.”
She said the municipality would also be prohibited from borrowing for three consecutive municipal financial years.
According to the Treasury, the approach will help Eskom’s balance sheet and result in no additional funds being required from the fiscus.
It clarified that the intervention was not part of the Eskom Debt Relief Bill that was passed by Parliament’s standing committee on appropriations.
The bill is now set to be debated in the National Assembly. It proposes R254bn debt relief for Eskom.
Eskom did not respond to requests for comment on the matter by deadline on Wednesday.
On Wednesday, it plunged the nation into Stage 6 load shedding citing “breakdowns are currently at 18 972MW of generating capacity while the generating capacity out of service for planned maintenance is 3 222MW”.
Cape Times