Municipalities Eskom debt escalates to R70 billion

Municipal debt remains an area of concern and has increased to R70 billion – from R58.5 billion in March 2023 – Eskom revealed in its interim results for the period ending 30 September 2023

According to Eskom, the Top 20 defaulting municipalities account for 76.7% of total arrear municipal debt.

“Eskom continues to make efforts to address the arrear debt, however, these have not yielded the desired outcome as the debt continues to escalate.”

The power utility, however, expects the municipal debt relief program to improve payment levels and the settlement of current accounts by municipalities.

A total of 52 municipalities have received approval or conditional approval from the National Treasury to participate in the program, accounting for 86% of the total municipal arrear debt balance on 31 March 2023.

Another 20 defaulting municipalities, accounting for a further 11%, have applied for municipal debt relief and are awaiting approval from the National Treasury.

In its financial statement released on Wednesday, Eskom recorded a net profit of R1.6 billion.

Revenue also grew to R158.6 billion, a 9.5% increase from R144.8 billion in September 2022, due to the high tariff increase for the 2024 financial year.

However, sales volumes declined due to supply constraints, lower electricity demand from customers due to difficult economic conditions, and the impact of increased embedded self-generation such as solar and wind.

Eskom said non-technical losses, including the theft of electricity through illegal connections, meter tampering, and ghost vending, also contributed to declining sales volumes.

Eskom cautioned that despite making a profit in the first six months, it expects a net loss of R23.2 billion at the end of its financial year in March 2024.

This, according to the parastatal, is due to the continued poor generating plant performance, lack of cost-reflective tariffs, high debt service costs, and non-payment by customers.

“The unsatisfactory operational performance and depressed economic conditions continue to have a direct impact on Eskom’s financial sustainability, requiring us to make difficult trade-offs between liquidity, the utilization of OCGTs to minimize load shedding for the benefit of the economy, as well as accommodating spend on our operational recovery and capital expenditure programs,” said Eskom’s acting group chief financial officer Martin Buys.

“Our financial performance also remains hampered by an inadequate tariff path, above-inflationary cost increases, non-payment by some customers as well as high debt servicing costs.

“Our turnaround plan focuses on addressing these key areas. We are also pinning our hopes on the Government debt relief, the municipal debt relief program, as well as the migration to cost-reflective tariffs.”