The Democratic Alliance believes that money paid to municipalities for electricity must be ring fenced for Eskom, as well as the portion of equitable share that is used for electricity. If this does not happen, municipalities will only dig a deeper hole for themselves.
In a response received from the Legislature, MEC responsible for Finance, Economic Development, Environmental Affairs and Tourism, Mr. Oscar Mabuyane, listed 25 municipalities that were in arrears with Eskom amounting to over R530 million, as at the end of 30th June 2018.
The people in these affected municipalities are finding themselves facing increasing hardships, as they are squeezed by the mismanagement of their municipalities on the one hand, and increasing pressure from Eskom on the other. All of this in an economy that is shrinking.
The ballooning debt owed to Eskom by municipalities in the Eastern Cape is a clear indication of the appalling mismanagement of funds by ANC led municipalities. Outstanding fees owed to Eskom has almost tripled from the R186-million reported two years ago.
The largest debt owed to Eskom is led by the Walter Sisulu Local Municipality being in arrears of more than R134 million, with Raymond Mhlaba Local Municipality not far behind with over R88 million in debt. Makana Local Municipality owes R75 million and King Sabata Dalindyebo Local Municipality owes over R67 million. These amounts are largely a result of long term financial mismanagement.
Eskom’s strategy of cutting off the electricity of municipalities, as a punitive measure, is likely to increase as they are pressurized to claw back their own huge debt burden. This strategy could, however, cause businesses and industries to collapse in the affected municipalities.
This could result in a dangerous downward spiral, as it could lead to even more poverty and unemployment in the Eastern Cape, something that this province can ill afford.
Eskom is heavily weighed down by its debt burden, which totaled R387 billion, as at the end of March 2018. Eskom’s perilous financial position is a major risk to the finances of South Africa as a whole.
One can expect them, to get tougher with defaulting municipalities. This means that sound financial plans need to be put in place in municipalities. Provincial Treasury needs to ensure that they are effective.
A DA-led government will continue to fight for sound financial management at local government level so that residents have access to quality services.
Note: Please see below a 30-second soundclip in English from Bobby Stevenson, Shadow MEC of Finance, on the above issue.