67 municipalities have requested help from the National Treasury as part of its Municipal Debt Relief programme, with potentially R56.8 billion of debt owed to Eskom being written off.
Finance Minister Enoch Godongwana revealed this in the Medium-Term Budget Policy Statement (MTBPS), where he outlined the dire state many of the country’s municipalities are in.
Godongwana said it would be counterproductive to try and address the problems at Eskom without dealing with chronic municipal non-payment and historical debt owed to the utility.
Eskom revealed in its annual results last month that municipal debt owed to it, including interest, increased by R13.7 billion to R58.5 billion.
This problem is compounded by the payment rates from municipalities continuing to decrease to 76%.
In 2018, invoiced municipal debt totalled a mere R13.6 billion. This has grown to R58.5 billion at the end of the 2023 financial year, a 31% increase from the year before.
The top 20 defaulting municipalities pay less than half of their invoiced amount, with a 46% payment level.
Electricity Minister Kgosientsho Ramokgopa has previously said he is deeply concerned about the financial health of many municipalities that owe Eskom billions.
“The finances of municipalities are very illiquid. Some are insolvent and are not raising sufficient revenue to meet their operational activities.”
The Minister added that if the debt owed by municipalities remains unaddressed, it will increase exponentially and place an unsustainable burden on Eskom.
The National Treasury has introduced support to relieve municipalities of the debt they owe to Eskom.
On application, the debt owed to Eskom up to 31 March 2023 will be written off over a three-year period in equal annual tranches.
This is provided the municipality complies with set conditions, such as enforcing strict credit controls, enhanced revenue collection, and up-to-date payment of Eskom’s monthly current account.
By October, 67 municipalities had applied to the National Treasury for debt relief, totalling R56.8 billion or 97% of the total debt municipalities owe to Eskom.
28 applications have been approved so far, and the remainder are being assessed and verified, Godongwana said.
“The ultimate goal is the profound transformation of these municipalities by empowering them to build financial resilience, amplify their capacity to generate sustainable revenue and rekindle a culture of paying services rendered,” Godongwana concluded.