Appeal court pulls the plug on Eskom's 'coercion' of cash-strapped municipalities

30 December 2020 - 12:17 By ernest mabuza
The Supreme Court of Appeal has dismissed an appeal by Eskom, whose decisions to interrupt power supply to two Mpumalanga municipalities had been declared unlawful.
The Supreme Court of Appeal has dismissed an appeal by Eskom, whose decisions to interrupt power supply to two Mpumalanga municipalities had been declared unlawful.

Eskom’s attempts to coerce municipalities to pay when they are unable to do so is undesirable. The Supreme Court of Appeal (SCA) said this on Tuesday as it dismissed two applications by the power utility.

They related to appeals against two decisions by the high court in Pretoria, which set aside Eskom's decisions to interrupt the bulk supply of electricity to Mpumalanga's Emalahleni local municipality (ELM) and the Thaba Chweu local municipality (TCLM).

The appeal court said the dire situation faced by these municipalities obliged the national and provincial governments to intervene, as provided for by the constitution.

“What this means is that without the national and provincial governments’ intervention in the financial crises experienced by the ELM and the TCLM — and many other similarly situated municipalities — all are doomed,” SCA deputy president Xola Petse wrote in a unanimous judgment by the full bench.

The municipalities are among Eskom’s serious defaulters.

In June 2017, the power utility threatened to cut off supply to the two municipalities to induce them to pay. At that stage, Emalahleni owed Eskom about R1.2bn, while Thaba Chweu owed approximately R407m.

Both signed acknowledgments of debt in favour of Eskom, undertaking to pay off the accumulated debt in agreed monthly instalments. But these undertakings were not honoured, leading to Eskom interrupting their power supply.

The power utility's decision was challenged by various parties.

In the case of Emalahleni, Resilient Properties, which owns the Highveld Mall there, brought the application. The 68,200m2 shopping centre has 185 retail tenants. Resilient had fulfilled its payment obligations to the municipality for electricity supply, despite the latter defaulting with Eskom.

In the second application, three chambers of commerce in the area challenged the decision to interrupt power supply in Thaba Chweu. They said the interruptions had a devastating effect as they threatened the fabric of society, with hospitals, schools, households and businesses severely disrupted.

Gwilym Rees, who filed an affidavit on behalf of the chambers, explained the effects of the cuts.

“Firstly, when the power supply is cut, all sewage works immediately come to a standstill. This means that sewage is not pumped to the sewage processing plants, but instead will simply sit (and will eventually spill into the streets) for the duration of the cut-off, with the associated, serious risks to the health of the community.”

The high court found in favour of Resilient and the chambers, and said Eskom's decision was unlawful.

It held that Eskom failed to comply with its constitutional and statutory obligations to make every reasonable effort to settle the dispute that arose between it and the municipalities in relation to the implementation of its decision to interrupt the supply of bulk electricity.

Eskom appealed against the decisions, but the SCA dismissed the appeals with costs. It said Eskom had realised the parlous state in the municipalities warranted intervention by the provincial government and, if need be, the national government.

The court said this avenue was not explored because Eskom was not prepared to wait for that process to unfold.

It said Eskom’s decision to interrupt bulk electricity supply to the municipalities was used as leverage to extract payment. The power utility did this knowing full well it would not result in the financially strapped municipalities settling their debts, the court added.

“And these measures were adopted by Eskom against the backdrop that Eskom itself had come to realise that without the intervention of both the national government and the provincial government, it was beyond the power of the ELM and the TCLM to turn their fortunes around on their own.”

The court said the record showed that the two municipalities had been in financial crisis for nearly two decades.

“And given their parlous financial state, it is hardly surprising that they defaulted on their payment arrangements with Eskom.”