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africa|engineering|engineering-news|eskom|financial|mining|services|sustainable

End of the beginning

10th November 2023

By: Terence Creamer

Creamer Media Editor

     

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News that 67 municipalities that collectively owe Eskom R56.8-billion, or 97% of the municipal arrear debt of R58.5-billion owed to the utility at the end of March, have formally applied to participate in a debt write-off programme should be welcomed.

At the time of writing, the National Treasury had confirmed to Engineering News & Mining Weekly that 36 municipalities had been approved for participation under the scheme, but that the number was “dynamic” and should, thus, rise further. It was already a significant step-up from the 28 approvals confirmed after the initial closing date for applications at the end of September – a deadline that was extended by a month, given ongoing interest.

Should the remaining municipalities be admitted to the programme, it would represent a major milestone in dealing with a problem that has grown markedly over the past number of years, with Eskom revealing recently that the municipal arrears debt figure had risen to above R65-billion by July.

True, it may seem strange to applaud a scheme that effectively allows for the write-off of debt that should not have been accumulated in the first place. However, it comes amid a begrudging recognition that the problem was not only real but growing and was posing a threat not only to Eskom, but to the municipalities, which had no way of paying the debt.

The second reason it should be welcomed is that if the municipalities are able to adhere to the 14 conditions for the full three-year duration of the scheme they should emerge, as Finance Minister Enoch Godongwana put it in his Medium-Term Budget Policy Statement, profoundly transformed. They will be empowered to generate sustainable revenue, while the culture of paying for services rendered may finally be entrenched.

In other words, the not insubstantial carrot of a full debt write-off for doing the right things consistently could have the added benefit of instilling the discipline that has to become routine if South Africa’s municipalities are to be built on foundations of financial resilience and sustainability.

The third benefit is that this could be the start of finally beginning to tackle what has become a chronic and intractable problem for Eskom itself. The utility has hitherto not been able to find a workable solution, notwithstanding all the handwringing and the seemingly endless “engagements” that have taken place on the matter over several years.

True, it means that Eskom, which is itself in a precarious financial state, will never receive what is owed to it. But for the debt to be fully written off in three tranches, qualifying municipalities will have to keep their current accounts up to date with the utility, which could help ease its liquidity pressures.

It’s vital to recognise, though, that South Africa is but at the end of the beginning in its efforts to deal with this problem. Without diligent execution over the coming three years, we could soon be back to square one.

Edited by Terence Creamer
Creamer Media Editor

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