Municipalities owe Eskom billions

A media storm around Eskom has been brewing as investor confidence proves shaky. This after added pressure through the high court ruling against the application to the National Energy Regulator of South Africa (NERSA) for a 9.4 % electricity tariff increase. While the decision was attributed to the fact that the Regulator’s process had not been properly applied, many are also of the opinion that the taxpayer shouldn’t have to fork out more in tariff increases while there are municipalities owing billions to Eskom.

But the state enterprise, under the leadership of CEO Brian Molefe, addressed the Portfolio Committee on Public Enterprise in Parliament last week, adamant that the financial position of the company has improved with fixed assets increasing by 14%. He further touched on the defaulting municipalities by adding that payment agreements have been signed with 60 of them, including 19 of the top 20 as established at 31 March. The outstanding debt which was more than 60 days overdue is estimated to be around R10.8 billion, with the total debt totalling about R27 billion.

With the spotlight on the financial status of state owned enterprises (SOEs) at the moment, from South African Airways (SAA) to Passenger Rail Agency South Africa (Prasa) and Eskom, there has been increased investor uncertainty. As talk of liquidation and privatisation have been doing the rounds.

While the relevant government officials seem too hesitant to talk up on the matter, Minister of Public Enterprises, Lynne Brown, in an attempt to quell investor fears, said: “I, as Shareholder Representative on behalf of Government, have recently concluded Eskom and Transnet's Annual General Meetings. The Boards have fulfilled successfully their performed fiduciary duties and both companies had unqualified audit reports. This is a critical indicator for any international or national investor to invest in the future of both companies and in South Africa. As the Shareholder Representative of Government in these two SOCs (state owned companies), I urge current and potential future investors to directly engage with me and the SOCs about any matter of concern in regard to their investments.”

Earlier this year saw Eskom dangling a carrot to these over indebted municipalities in the form of a waiver on their interest payments in exchange for the councils abiding by the payment agreements made.

Despite Eskom’s debt difficulties, Eskom consumers have been fortunate enough to not have experienced load shedding over the past year.

Reports have stated that NERSA is set to challenge the high court’s ruling against granting Eskom an effective 9.4 % increase for this year.

“The court previously ruled that Eskom had not fully complied with the NERSA methodology in two respects: The application had been submitted outside of the permitted timeframe and was out of time; and the RCA application should have been based on quarterly reports by Eskom to NERSA. These had not been submitted,” reported BD Live.

The body is set recommend the matter be taken to the Supreme Court of Appeal.

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