Deputy President Paul Mashatile affirms that the South African government recognizes that debt relief alone will not be sufficient to bring Eskom back to financial stability. Therefore, the state is collaborating with municipalities to assist in settling their growing bills.
Mashatile notes that the recent tariff increase approved by the regulator was a key factor considered in determining debt relief. Without it, the debt relief arrangement is not sustainable. The National Energy Regulator of South Africa (Nersa) approved an 18.65% increase in electricity tariffs effective from 1 April this year.
During his Budget speech, Finance Minister Enoch Godongwana announced Eskom’s debt relief of R254 billion. Mashatile was answering questions in Parliament about municipal debt to Eskom and water entities, illegal electricity connections, critical economic infrastructure sabotage, and animal vaccine shortages.
Mashatile explains that the government aims to provide sustainable essential services such as water, electricity, and sanitation, which should be the hallmark of a developmental government. He, therefore, works with the Department of Cooperative Governance and Traditional Affairs, National Treasury, and other departments to ensure that municipalities deliver critical services.
Municipalities owed Eskom R56.3 billion by the end of 2022, and this amount continues to rise. To address this, the government introduced a debt relief package for Eskom, aiming to improve the utility’s balance sheet. Eskom will write off some of the municipalities’ debts under strict conditions with guidance from National Treasury.
Municipal debt relief will be conditional and application-based. This relief is intended to correct underlying behavior and operational practices in defaulting municipalities.
To change consumer behavior, Eskom is introducing a smart metering solution that will reinforce a culture of payment for services rendered. Mashatile highlights the culture of non-payment by municipalities, organs of the state, and individual household customers as concerning.
The escalating debt in the water sector is attributed to the absence of economic and regulatory regimes for infrastructure investment, costing and pricing, non-payment of services, and unauthorized connections. Mashatile indicates that the government has measures in place to strengthen billing and revenue collection to address the escalating debt of municipalities to water entities.
The success of these relief measures depends on coordination across all spheres of government. The government will continue working with all sectors of society to increase and build sustainable economic activities in all municipalities to create viable tax bases for social and economic development. The government, working with Members of Parliament and civil society formations, is ready to work with every sector to advance the common national agenda of addressing unemployment, poverty, and inequality.