From 2009 to 2013 the municipality’s debt to Eskom had accrued to R106-million.
In June last year the municipality owed Eskom R206-million and during 2013/2014 this grew with accumulating interest to R276 million principle debt (excluding current accounts).
During 2013 a process to resolve this matter was facilitated by Department of Co-operative Governance and Traditional Affairs (COGTA) and with Eskom. An agreement was reached and concluded that as from November 1 last year current account to be paid in full.
Also, a repayment agreement on arrears amount was to be signed before March 31 and a repayment schedule had to be submitted before June 30.
The repayment agreement was signed and a draft re-payment schedule was submitted to Eskom on June 15.
“To move to a long term solution the current negative situation on electricity utilisation needs to be addressed and in the municipality a strategy has been formulated and will be finalised by council in hopefully August,” said Mr Theo van Vuuren, the city’s administrator.
He said this is based on reduction of illegal use and bulk requirements and broadening the income stream. This strategy can over a year result in an expected annual loss on electricity of R231-million to an annual positive surplus of R190-million. This is critical for the municipality to move towards full financial recovery.
“Important to note is that the agreement with Eskom provides us with time to recover from the situation the council found itself in at the beginning of 2013 by ring-fencing the arrears. The repayment schedule will depend on our ability to recover arrears from the customers who have for year’s utilised electricity without paying the correct amounts. For this reason the revenue enhancement initiative, correction of our billing information and several operations conducted by the municipality are critical instruments. In addition, to ensure we move forward in a fully cost recovery mode the proposals on fortified structures and split metering are important and council will be fully briefed in the near future,” Van Vuuren said.
The major problem with electricity service is that there are thousands of illegal connections to the grid. The loss in distribution has increased from 23% to 32,5% whilst all efforts are made to stabilise the situation. To stabilise the electricity distribution network will cost R330 million, this amount will be needed to install protective structures and remote/split meters. In principle council is in agreement to this process, but a final decision is still outstanding,” Van Vuuren said.
The municipality’s coffers are also still filled with nothing but coins.
The municipality is still under severe cash flow difficulties and after a year’s implementation of the Financial Recovery Plan has become positive but has not rebuilt an income stream to cover previous uncovered debt. The situation has however improved very well under the circumstances prevailing in the municipality. The cash flow for 2013/14 has been positive but the continent liabilities and Eskom account currently not cash backed.
