Eskom given hands-on role to manage R95.4bn debt owed by municipalities

South Africa’s municipality debt to Eskom has reached alarming levels, sitting at approximately R95.4 billion as of November 2024 and projected to hit R110 billion by March 2025.

In response to this growing crisis, the Ministry of Electricity and Energy is rolling out a structured intervention programme to improve municipal electricity operations while maintaining public ownership.

Minister of Electricity and Energy Kgosientsho Ramokgopa recently outlined the government’s strategy to address revenue collection shortfalls at the state-owned utility, emphasising an “active partnering approach” as the cornerstone of their intervention.

“The municipality remains the licensed distributor but enters into a structured active partnering agreement with Eskom,” Ramokgopa explained in response to a question from DA MP Edwin Victor Baptie about alternative strategies to remedy revenue collection shortfalls.

Active partnering framework

The approach involves Eskom taking a hands-on role in helping municipalities manage their electricity distribution businesses.

According to Ramokgopa, this includes Eskom assisting with “billing, revenue collection, infrastructure maintenance, and reticulation services”.

In his parliamentary response, the minister said the key element of the framework involves separating municipal electricity accounts from other municipal finances to prevent misallocation of electricity revenue.

Additionally, customers pay electricity bills into controlled, audited bank accounts, with Eskom collecting revenue on behalf of municipalities to ensure accountability.

The programme also addresses concerns about the Free Basic Electricity (FBE) grant for indigent households, which will now be provided directly via Eskom to prevent financial leakages within municipalities.

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Maluti-a-Phofung’s Eskom active partnering story

Ramokgopa highlighted the success of the active partnering model in Maluti-a-Phofung Municipality in the Free State, which he described as “one of the worst-performing municipalities in electricity distribution”.

Before the intervention, massive arrears to Eskom plagued the municipality, severe infrastructure neglect led to constant blackouts, over 60% of customers consuming electricity illegally, and an inability to bill and collect revenue efficiently.

Since implementing the active partnering approach, Ramokgopa reported that “through Eskom’s management, the municipality recovered R2 billion in outstanding payments” and reduced electricity theft and illegal connections through stricter monitoring and enforcement.

He said infrastructure stability has also improved with emergency maintenance and repairs to substations and transformers, reducing unplanned outages, while investment in meter audits and smart metering systems has improved billing accuracy.

“Revenue from paying customers now funds infrastructure upgrades, reducing reliance on grants,” Ramokgopa stated, adding that “the municipality is no longer adding to its Eskom arrears”.

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Expansion to other municipalities

Following these positive results, the ministry is extending the Active Partnering Programme to other municipalities in distress.

The program has already been rolled out in Limpopo municipalities, including Modimolle-Mookgophong, Thabazimbi, and Bela Bela, all of which have shown “qualitative improvements,” according to Ramokgopa.

Immediate expansion plans include Ditsobotla Local Municipality in North West province and Tokologo Local Municipality in the Free State.

The ministry is also working with Cooperative Governance and Traditional Affairs (Cogta) and South African Local Government Association (Salga) to identify additional municipalities to be onboarded into the program.

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Addressing illegal connections

In response to an additional question regarding illegal connections, Ramokgopa outlined initiatives taken to provide security for Eskom staff when removing illegal connections.

“Eskom security departments have established security contracts which include escorting Eskom employees intending to execute work in high-risk areas and the removal of illegal connections on a small scale,” Ramokgopa explained.

He further detailed that areas with illegal connections are scanned for risks or threats before deploying Eskom teams.

The South African Police Service (Saps) district commanders have been approached to initiate plans and mobilise resources to protect Eskom employees. Saps district commanders’ offices lead the planning of such operations from a security perspective, with district public order policing participating in planning sessions.

Ramokgopa confirmed that all provinces had submitted requests for assistance on an ad-hoc basis at their respective provincial joint committee meetings between provincial Eskom and Saps, with Saps committing to support Eskom security as needed.

Regarding measures to monitor and respond to illegal reconnections, the minister explained that once a customer has paid their tamper fine, a work request is created to reconnect them.

These requests are grouped by geographic location and tracked through the work management lifecycle until the customer is reconnected

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