Andre de Ruyter warns alarming municipal debt a risk to Eskom’s financial viability

Former Eskom CEO Andre de Ruyter has warned that alarming levels of municipal debt, which stands at R57 billion, impact Eskom’s ability to increase generation and maintenance spend.

De Ruyter shared this information as part of his answering affidavit in response to a court case regarding load-shedding lodged by ActionSA, the UDM, and 17 other parties.

The case seeks to, among others, declare the ANC-led government’s response to load-shedding unconstitutional and in breach of fundamental human rights.

He said the alarming amounts of debt owed to Eskom by municipalities impacted Eskom’s financial viability and its ability to increase generation and maintenance spend.

The problem of non-payment by municipalities has ballooned in recent years – from R5 billion in 2015 to R57 billion in 2023.

The top 20 defaulting municipalities, including Maluti-a-Phofung, Emalahleni, Matjhabeng, and Emfuleni, constitute 80% of the total invoiced municipal arrear debt.

De Ruyter further revealed that 48 municipalities have arrear debt of more than R100 million each.

“Eskom has taken numerous steps to arrest the escalation of debt owed by municipalities and to reduce the overdue debt,” he said.

“Suffice it to say that despite Eskom’s best and continuing efforts, the problem of escalating municipal debt remains. It poses an increasing risk to Eskom’s financial viability.”

The former Eskom CEO highlighted that the trend of non-payment by municipalities is continuing.

“Eskom cannot afford for this trend to continue. The overdue debt has contributed negatively to Eskom’s liquidity, financial performance, and sustainability,” he said.

Eskom has adopted a “Municipal Debt Strategy” to address the challenges of municipal debt and revenue collection.

The strategy includes stopping the defaulting and enforcing payment of current amounts, reducing overdue debt, and preventing future defaulting through pre-emptive action.

However, this strategy has not yet significantly improved the situation.

“Eskom requires government intervention to support the reduction or elimination of municipal debt and to assist Eskom to collect its outstanding debt,” De Ruyter said.

He said they have been engaging with National Treasury and the Eskom Political Task Team established by President Ramaphosa in 2020.

“Unfortunately, progress has been slow,” De Ruyter said.

Eskom municipal debt