Dark days ahead for residents of South Africa’s richest city

Johannesburg’s electricity supply is at risk, as the city’s R5.3 billion debt to Eskom could carry severe consequences for residents.

This is a warning from Business Leadership South Africa (BLSA) CEO Busi Mavuso, who said the country cannot afford for Johannesburg to fail.

She said the city’s debt to Eskom is not being resolved in a sustainable way, putting Johannesburg’s electricity supply “genuinely at risk”.

Notably, the city has had many opportunities to make things right with Eskom, with the utility having granted Joburg a 30-day delay for its Promotion of Administrative Justice Act (PAJA) process.

This is the legal procedure Eskom must follow before it can cut supply to the city, and the 30-day delay was brokered by Electricity Minister Kgosientsho Ramokgopa.

The minister met with Joburg mayor Dada Morero in May this year to discuss the city’s debt owed to Eskom.

Notably, this was not the first time Eskom has attempted to work with the City of Johannesburg to address its debt burden.

Over the past year, Eskom has been implementing what it calls Distribution Agency Agreements (DAA) with some of the municipalities that are in debt to the utility.

These agreements present a more structural and deliberate way for Eskom to intervene in municipalities, with the utility essentially partnering with cities to ensure that the money owed to it is collected, ringfenced, and paid back.

In May this year, Joburg agreed to enter into a DAA with Eskom, after the utility threatened to cut supply to the city over its unpaid debt.

However, this does not mean Joburg is in the clear yet. As Mavuso explained, after announcing the 30-day delay in Eskom’s PAJA process, the utility revealed that Joburg had missed a 5 June deadline to pay its current account.

This is despite the city having paid R1.2bn toward its accounts since the PAJA process began. 

“Because the city missed that deadline, Eskom is now resuming the PAJA process, which could ultimately mean cutting electricity supply to City Power,” Mavuso warned.

Joburg struggling to pay its bills

Mavuso explained that Johannesburg’s weak financial position makes settling its legacy debt very difficult.

“Our analysis shows Johannesburg is nearly a year late on average in paying its suppliers, and Eskom is no exception,” she said. 

“The BLSA Council is meeting this week to consider an analysis of Johannesburg’s predicament and discuss how business can support its recovery. There is much to be done.”

In his recent State of the City Address, Morero outlined Johannesburg’s plans to address the city’s debt to Eskom.

However, concerns remain about the city’s ability to cover its planned maintenance expenditures in the year ahead, much less its debt repayments.

“The city has consistently been unable to collect the revenue it forecasts in its own budgets,” Mavuso said.

“It spends far too little on maintaining its infrastructure, let alone investing in new infrastructure.” 

“Its budget is consumed by consumption spending, but it fails to provide the services that businesses need to be competitive and contribute to the growth of the South African economy.”

This not only puts Joburg residents’ electricity supply at risk, but also threatens Eskom’s sustainability.

Mavuso said restoring Eskom’s financial position matters beyond Johannesburg, as the substantial debt owed to the utility presents a significant risk to its financial health.

Currently, debt owed to Eskom stands at around R150 billion, with the utility estimating it could reach R300 billion by the end of the decade.

“Business stands ready to support credible public sector partners who are prepared to deliver, whether that is the City of Johannesburg or Eskom and other state-owned entities,” Mavuso said. 

“But that support is premised on a real commitment to following through on established policy, because policy follow-through is what will restore economic growth.” 

“We will support Eskom in recovering the debts it is owed. But we remain equally focused on ensuring the electricity market that emerges from this process is one that is genuinely, structurally competitive – not reform in name only.”