Eskom’s CEO would have been fired if it were listed on the JSE

Eskom CEO Dan Marokane would have been fired if the company were privately run and listed on the JSE because of the R100 billion debt owed to the utility by municipalities. 

This is feedback from Electricity Minister Kgosientsho Ramokgopa, who made the comment to stress why Eskom should be judged differently from a JSE-listed corporate.

Speaking at Eskom’s latest State of the System media briefing, Ramokgopa praised the utility for its work in significantly reducing load-shedding. 

Eskom’s success in tackling load-shedding has led the minister to open new fronts on which the utility’s resources must be mobilised. 

One of these is municipal debt, with South Africa’s municipalities owing Eskom over R100 billion due to years of non-payment. 

“As the chair of Eskom’s board has made clear, this is an existential challenge for the utility, with it being owed over R100 billion,” Ramokgopa said. 

While, in theory, this problem is relatively easy to solve by clamping down on non-payment and withholding services, this option is not open to Eskom. 

Due to the sheer number of municipalities and the economic importance of some of the metros that owe Eskom billions, it cannot withdraw services without crippling the economy. 

“I always make the point that if Eskom were a listed company, the chair and his board would have been dissolved and Mr Marokane would have been fired,” Ramokgopa said. 

“But, this is a different set of circumstances. The instruments that Mr Marokane can use to address the municipal debt problem only really exist in theory. In reality, they don’t exist.” 

Ramokgopa used Marokane’s theoretical ability to suspend services to metros and municipalities as an example. 

“If the major metros, as is the case, owe Eskom money, he can initiate credit control by denying them access to electricity until they pay,” Ramokgopa said. 

“But, imagine a situation where Ekhuruleni is in the dark, Tshwane is in the dark, and the City of Johannesburg is in the dark. That is 33% of South Africa’s GDP. That instrument is effectively not at Marokane’s disposal.” 

This is why the municipal debt challenge has proven so difficult to solve, as it requires buy-in from various parts of the national government and municipalities. 

In effect, normal strategies to ensure payment and debt servicing are not available, and negotiation is the only option.

Solution is coming

The government and Eskom have tried several interventions to address the culture of non-payment at municipalities and encourage them to service their debt. 

However, despite these interventions, the growth in debt owed to Eskom has not slowed, with larger municipalities and metros falling into the non-paying category. 

Eskom CFO Calib Cassim previously warned that if the municipal debt burden continues to grow, it will effectively undo the government’s R254 billion relief package for the utility. 

“If the growth of municipal debt is not addressed, the R254 billion debt relief from the government will effectively be null and void,” Cassim said. 

“This does not help Eskom’s financial sustainability going forward. After this debt relief plan, we do not want to rely on the fiscus anymore.”

Eskom expects municipal debt to grow to R200 billion by the 2028 financial year if nothing is done to address the rise in non-payment for services.

Ramokgopa said municipal debt is fast becoming the main concern of the Electricity Ministry, as it threatens to undo the progress made in turning around Eskom’s operational and financial performance.

To solve the crisis, Ramokgopa said the government and Eskom are finalising the Distribution Agency Agreement (DAA). 

This agreement aims to equip municipalities with the skills needed to conduct financial planning, financial reporting, and capital allocation. 

Other skills, including technical skills to prevent energy losses at a local level, will also be supplied to municipalities as part of the agreement. 

“Through that, we will be able to ensure that we protect the revenue streams of Eskom and the municipalities. We have to work together,” Ramokgopa said. 

“We have finished the DAA. It has gone through the governance committees of Eskom, and it is coming to me, and then we go to Cabinet.” 

Ramokgopa said they have engaged with municipalities across South Africa and have received support for the new plan.