‘No possibility under the sun R78 billion will be collected’, says Ramokgopa on municipal debt

The R78 billion municipal debt owed to Eskom needs to be urgently addressed, as projections suggest it could escalate into trillions of rands over the next 26 years.

This is according to Electricity and Energy Minister, Kgosientsho Ramokgopa.

Debt owed to Eskom ‘irrecoverable’

Speaking at a media briefing in Pretoria on Monday, Ramokgopa indicated that several factors, including revenue collection failures and illegal connections, had exacerbated municipalities’ challenges in settling their debts to Eskom.

Ramakgopa said most of the debt was not recoverable.

“Collectively, municipalities are owing Eskom R78 billion and… a lot of this is irrecoverable. There’s no possibility under the sun that we are going to collect that R78 billion. It’s important that we resolve this picture,” he said.

The minister warned the growing municipal debt poses significant challenges for Eskom.

“Eskom needs this money for it to be able to reinvest back into its own infrastructure. Municipalities have to pay that money… but on an objective ground, they simply don’t have the means to be able to pay,” Ramokgopa continued.

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He revealed it has been projected that Eskom will be owed R3.1 trillion by 2050 “if we don’t resolve this problem”.

“Eskom will collapse. Generation capacity is going to be compromised. So, it’s important that we resolve this question and that’s why I am saying this is the most urgent task confronting us.”

Ramokgopa further emphasised that government “can’t fold our arms” and must take action to help municipalities improve infrastructure and ensure the efficient distribution of electricity to households.

“We need to help them from a technical point of view.”

Watch the briefing below:

Switch-off municipalities?

The minister pointed out the “quickest way” to recover the money owed would be for Eskom to cut off power supply to municipalities.

“Imagine what will happen to the South African economy because remember there will be businesses in those municipalities [who] are paying diligently.

“They are not responsible for what they are seeing. So the quickest way, we can just decide we are not giving that municipality [electricity] until you pay.

“Unfortunately, it’s not that easy… it is a convenient way. I’m sure if we were running a business that does not look after public interest and has no social objective, we would have switched off a long time ago, but we don’t go that route.”

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Ramokgopa added that ongoing non-payment was directly impacting Eskom’s capacity to address distribution infrastructure requirements, thereby, necessitating the enforcement of load reduction.

Eskom reported in November last year that over time, arrears debt – especially municipal debt – had escalated to unsustainable levels.

By the end of March 2023, the arrears in municipal debt had reached R58.5 billion, reflecting a significant 30% increase from R44.7 billion in March 2022.

The municipal debt increased to R70 billion by mid-December 2023.

Eskom debt relief

The National Treasury implemented debt relief measures aimed at bolstering the cashflow of struggling municipalities.

These measures enable municipalities to settle their bulk electricity supply debt to Eskom over a period of three years.

Eskom can write off the debt owed if the municipality meets 14 conditions set by Treasury.

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