Maverick Citizen

UNCOOPERATIVE GOVERNANCE

Eastern Cape municipalities’ Eskom debt soars to ‘alarming’ R2bn despite summons, missed deadlines and threats

The Makana Local Municipality, where a financial rescue plan also had to be implemented, owes millions. (Photo: Black Star / Spotlight)

Despite threats of disconnection, and many pages of legal rulings, the debt of cash-strapped Eastern Cape municipalities to Eskom has doubled to R2bn in the past year as the slow financial collapse of local government in the province continues.

In what Eskom said was an “alarming rate”, municipalities’ unpaid debt to the power utility in the Eastern Cape has doubled from R1.1-billion to close to R2.2-billion in 13 months.

The Democratic Alliance’s spokesperson on Cooperative Governance and Traditional Affairs, Vicky Knoetze, said the MEC, Xolile Nqatha, is now “bound by section 139 (5) of the Constitution” to place several municipalities under administration.

In an answer to a parliamentary question, Nqatha said last week that Eastern Cape municipalities now owe Eskom R2.157-billion, of which R1.322-billion has been outstanding for more than three months.

In December 2019, the province’s municipalities owed Eskom R1.1-billion. Three municipalities currently under administration owe the power utility close to half a billion rand.

The municipality with the highest amount of debt is the Enoch Mgijima Local Municipality, based in Komani, which owes Eskom R457.8-million.

A financial rescue plan was implemented in the municipality in 2020 as part of a court settlement, with the umbrella group Let’s Talk Komani acting on behalf of several civil society organisations in the area. By that time several businesses in the area had also obtained a court order against the municipality to force it to pay Eskom on time and prevent the disruption of electricity to the area.

In December that year, however, the Makhanda High Court held that the mayor and municipal manager of the municipality were guilty of contempt of court for failing to adhere to this court order. The pair were handed suspended sentences of one year in prison.

In December 2019 the municipality made an initial payment of R90-million immediately and a further payment of R23-million on 20 December. The agreement was that the municipality should then pay a monthly R30-million as well as all current accounts until the debt had been settled.

The municipality paid and reported until February 2020 and then stopped. Mayor Luleka Gubhula-Mqingwana and municipal manager Nokuthula Mgijima were then held in contempt of court for failing to comply with the order.

Municipal spokesperson Lonwabo Kota, however, said the municipal council had decided that this ruling would be appealed.

“The municipality believes that a higher court can reach a different decision in terms of having only the executive mayor and municipal manager bear the responsibility by being singled out for imprisonment and for paying legal costs. 

“The municipality struggled to pay the Eskom debt after the introduction of national lockdown as businesses and households were unable to pay their municipal dues due to economic repercussions of lockdown. 

“Municipal revenue collection steeply decreased and the municipality was not able to keep up with payment terms of Eskom and other creditors,” he said.

Gubhula-Mqingwana and Mgijima claimed in papers before court that the coronavirus pandemic had prevented them from paying Eskom. They said the pandemic had a devastating effect on the municipality’s financial position because they were “required to spend enormous resources in this regard. Something that was wholly not expected.”

The municipality is now being sued for the immediate payment of R90-million, according to documents provided to the Eastern Cape legislature by Nqatha.

The Walter Sisulu Local Municipality, based in Burgersdorp, owes R294-million. The municipality has been embroiled in legal action with Pioneer Foods over its failure to pay Eskom and the resulting power interruptions.

The Raymond Mhlaba Local Municipality, with its seat in Fort Beaufort, owes R205-million and the Inxuba Yethemba Local Municipality in Cradock R193-million. The King Sabata Dalindyebo Local Municipality, in Mthatha, owes R165-million and the Dr Beyers Naude Local Municipality, with its base in Graaff-Reinet, R141-million, according to the information provided by Nqatha.

An arbitration hearing to solve an ongoing dispute between the Dr Beyers Naude Local Municipality and Eskom will start on Tuesday, 2 February. Meanwhile, a court order is keeping the lights on in several towns that fall under the municipality. 

Eskom provincial spokesperson Zama Mpondwana said the power utility can confirm the “alarming and escalating local municipal debt on bulk electricity supply in the Eastern Cape”.

The Makana Local Municipality, where a financial rescue plan also had to be implemented, owes R37.9-million. The Makhanda High Court ruled in January 2020 that the municipality should be dissolved for its unconstitutional failure to provide services to the community, including the non-payment of Eskom. The court ruling is currently on appeal at the Supreme Court of Appeal. Nqatha indicated that this municipality was sticking to its payment plan.

The Amahlathi Local Municipality in Stutterheim owes R25-million. The Amahlathi municipality last year declared that it was unable to pay salaries and the provincial government had to intervene.

“These municipalities have proven that they simply cannot effectively deal with their runaway Eskom debt. Despite this, there have been no consequences for those municipal officials who allowed this situation to get so out of control,” the DA’s Knoetze said.

A document provided by Nqatha detailed the steps that were being taken to ensure payment to Eskom. According to this document, the Amahlathi municipality is discussing a payment plan with Eskom.

The Amathole District Municipality, the latest municipality to be placed under administration in the province, owes Eskom R4.2-million. According to Nqatha, arrears have been mounting and disconnections have been scheduled.

A summons has also been issued against the Inxuba Yethemba Municipality, based in Cradock and Middelburg, for the payment of R6-million that was due in December.

The King Sabata Dalindyebo Local Municipality did not honour a payment agreement with Eskom and has been issued with a letter of demand. 

The larger OR Tambo District Municipality, also based in Mthatha, informed Eskom that it can’t pay as it is dealing with industrial action, but will let Eskom know as soon as the protest “subsides”.

Eskom provincial spokesperson Zama Mpondwana said the power utility can confirm the “alarming and escalating local municipal debt on bulk electricity supply in the Eastern Cape”.

“Eskom is in legal disputes with some of the local municipalities in the province and is engaged in regular discussions with defaulting municipalities in an effort to arrange and resolve payment glitches outside the court of law. 

“Eskom offers payment arrangements to accommodate struggling municipalities; however, these are not always honoured by some municipalities. 

“Eskom implements credit control measures as guided by the Promotion of Administrative Justice Act [Paja] and will soon be introducing an Active Partnership Programme with municipalities as another attempt to resolve payment issues amicably.

“Eskom reiterates that implementation of electricity supply interruption to defaulting municipalities through the Paja process is only done as a last resort,” he said. DM/MC

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