Power debt must be paid for sake of SA

If arrears owed by municipalities are not rolled back, Eskom and the country face a parlous future, writes Ben Ngubane

The dire state of indebtedness of municipalities to Eskom is to the obvious detriment of South Africa' s established goals.

Municipalities owe Eskom an amount of about R10.2-billion. This represents about 42% of annual sales and 41% of revenue annually.

Juxtapose this staggering picture with global whims and you get an indescribably corrosive future trajectory for Eskom, if the arrears aren't rolled back.

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In December 2016, the rating agencies downgraded Eskom's credit rating due to the significant uncertainty regarding cash flows and tariffs related to the Regulatory Clearing Account court case, among other reasons.

Our liquidity position has similarly been downgraded.

By virtue of its enviable location in the socio-economic life of South Africa, Eskom is a walking afflicted juristic person owing to the emotions and interests it evokes with each stride.

While we are impelled to keep a keen eye on the global investor community, we have to ensure that we don't lose sight of our economic profile, as a country, and all its innate permutations.

Our challenges transcend those who need electricity to launch themselves out of poverty, to a better life, to the upper-crust whose headache is to wrong-foot other captains of industry elsewhere in the world.

A fine balancing act isn't always fine enough to guarantee a safe landing for all our stakeholders.

Unlike most organisations that are able to quietly wrestle with their challenges, whatever impact is felt by Eskom has a bearing on the citizenry.

This point was nailed during the unfortunate load-shedding season, which, thanks to South Africans and Eskom's turnaround strategy, we were able to obliterate.

It was an outsize challenge requiring collective combat!

But back to the R10.2-billion arrears.

block_quotes_start Eskom's ability to supply electricity will be rendered obsolete if nonpayment by municipalities escalates. This will make insolvency inevitable block_quotes_end

Since the commencement of the Promotion of Administrative Justice Act process, we have seen commendable co-operation among stakeholders; we have been receiving part payments and signing payment agreements.

Eskom is a national asset that virtually rests on the shoulders of each citizen. Therefore, its sustainability equally rests on the contributions of the nation's citizenry.

Eskom hasn't rested on its laurels in the face of the mounting debt. It engaged all relevant stakeholders, and sought to entice municipalities with a "carrot" of suppressed interest on the overdue amount.

Further, while relevant laws and agreements permit us to apply 100% electricity withdrawal against a nonpaying municipality, we opted for a softer approach of interruptions for a few pre-announced hours every day.

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Judge Hans Fabricius of the High Court in Pretoria, when he dismissed AfriForum's challenge to the stoppages, agreed that Eskom had consulted widely over an extended period of time.

Empathising with our interruptions approach, as opposed to total electricity withdrawal, he urged Eskom's position to be considered within the context of the broader economy.

Interruptions stem from our duty of care; a responsibility grounded in our acute appreciation of South Africa and its contradictory profile.

We have to care! Our past eggs us on to care so that we can eventually succeed in reconciling our past and the future - the hostile past continues to inflict pain in the side of the desired future.

But one fact is inescapable: Eskom's ability to supply electricity will be rendered obsolete if nonpayment by municipalities escalates. This will make insolvency inevitable, which will in turn exert huge cost on the government and on citizens. It is a vicious cycle we can tailor to a good story, as a nation.

I urge all defaulting municipalities to expeditiously honour their outstanding amounts as a contribution to the creation of a sustainable future.

Dr Ngubane is chairman of Eskom