South Africa’s Eskom faces ‘existential problem’ as local councils fail to pay their bills
South Africa’s government has warned that power utility Eskom is facing an “existential crisis” after the amount of unpaid bills owed by local municipalities surged to a record R95bn ($5.2bn).
Outstanding municipal debt for power has jumped from R74.4bn at the end of March to R95bn currently, and is forecast to hit R110bn by the end of the first quarter. Money owed by the City of Johannesburg, South Africa’s economic powerhouse, jumped by almost 400 per cent.
Ramokgopa said Eskom’s progress comes as municipal debt has surged by 28% since March, potentially threatening the company’s financial stability and ability to improve infrastructure.
“This is an existential question facing Eskom,” he told a media conference on Thursday. “This is not an Eskom issue. This is a sovereignty issue and someone will have to pay for it much later.”
Mr Ramokgopa said municipal power debt outstanding had jumped from R74.4 billion at the end of March to R95 billion now, and is expected to reach R110 billion by the end of the first quarter.
Funds owed by the City of Johannesburg, South Africa’s economic powerhouse, have soared by almost 400 per cent.
Eskom CEO Dan Malokane said the downturn in South Africa’s economy, where many residents were unable to pay their service charges, and mismanagement of local authorities, which led to a payment crisis, led to some councils He also accused the government of unpaid water charges.
“There is a lack of strong leadership in some of these municipalities in terms of doing the right thing,” he said. “Electricity bills are collected from residents, but are used by municipal officials for other purposes.”
Eskom, Africa’s largest power company with an annual revenue of R295 billion, is forced to burn expensive diesel to keep the lights on as many of its aging power plants break down and less electricity is sold. As a result, the company has suffered significant losses in recent years.
Eskom on Thursday reported an after-tax loss of R55 billion for the year to March, which also included R36 billion in one-off costs related to the unbundling of its transmission unit. Pre-tax loss fell from R34.6 billion to R25.5 billion, which Chairman Mutet Nyati described as a “very poor performance”.
Malokane said the company’s fortunes had improved dramatically with the cessation of power outages, and the power company now expected to make a profit of more than R10 billion in the year ending March.
Nyati told the Financial Times earlier this year that the utility was able to restore power outages by focusing on maintenance at its six worst-hit power plants and overhauling its management.
However, the end of the blackouts came too late for the ANC to maintain its parliamentary majority, and its vote share collapsed to 40.2% in the May elections, forcing it to form a coalition with nine other parties.
Eskom’s problems went beyond its weak power plants, as the power company, the source of billions of rands worth of public contracts, became a hotbed of corruption during former president Jacob Zuma’s tenure.
