‘I don’t think privatising Eskom is the answer’: David Mabuza

Privatising Eskom is not going to solve the power utility’s debt woes.

This is the view of deputy president David Mabuza, who told the National Council of Provinces on Thursday that the state was well equipped to ensure there were sound governance structures within Eskom.

“We can run this power utility. We have done so in the past and we can’t fail. I don’t think privatising is the answer going forward,” said Mabuza.

Mabuza, who is the chair of the political task team on Eskom, said debt owed by municipalities to Eskom remained the biggest challenge to its financial sustainability.

“According to National Treasury, debt by municipalities to Eskom has grown from R44.8bn to R49.1bn between March and July 2022. This is not a desirable state of affairs for both Eskom and municipalities,” Mabuza told MPs.

He said that is why Eskom was part of the multi-disciplinary revenue committee meant to address challenges related to the payment of debts owed to Eskom by municipalities and organs of state.

He said: “The committee’s main task is to improve revenue collection and the strengthening of partnerships with stakeholders to improve payment levels of indebted municipalities.”

These efforts, said Mabuza, include the implementation of the power utility’s active partnering programme by defaulting municipalities.

Through this initiative municipalities can collaborate with Eskom to address their business and operational difficulties in a non-threatening and secure environment, ensure sustainability of electricity infrastructure and the upscaling of municipality’s technical expertise.

“The programme’s holistic focus enables municipalities to rebound financially and carry out their constitutional obligations to provide their customers with more dependable electricity.”

Mabuza said through the programme municipalities benefit from securing their revenue stream and are able to pay for their large-scale electricity purchases from Eskom.

“Eskom’s responsibility in this model is to assist municipalities by presenting them with a customised solution to handle their unique challenges.”

He said a number of defaulting municipalities are in the process of negotiating and concluding service level agreements with Eskom, including Maluti-a-Phufong local municipality, which is on the brink of signing the agreement with Eskom.

Eskom is also collaborating with Treasury on structuring solutions to assist with the collection of municipal arrears debt and manage the payment of municipalities’ current accounts to prevent further growth in arrears debt.

However, Mabuza said, “an arrears debt of R38bn is highly unsustainable”.

He said that is why Treasury is working with the public enterprises’ department and Eskom to develop sustainable solutions that will address the power utility’s debt burden in an equitable and fair manner.

“As part of internal cost efficiencies and equity conditions, a cost savings target of R21.4bn for the 2023 financial year, and a cumulative R61.8bn over the medium term of 2020 to 2023, has been set by Eskom.”

These interventions will not necessarily reduce tariff increases as tariffs are not cost reflective, said Mabuza.

Instead, he said the measures will assist in migrating towards the cost reflective arrangement.

“These cost savings will therefore, among other things, assist in absorbing the increase in diesel and wage settlement costs. The National Treasury in collaboration with the public enterprises department is regularly monitoring Eskom’s liquidity position and operational efficiencies,” he said.

Treasury was undertaking this work with a view to develop a multi-pronged solution, which includes improving internal efficiencies at Eskom and reducing the debt burden.

It is envisaged this solution will return Eskom to financial sustainability in the long-term.

Mabuza encouraged all citizens to pay for their electricity, and to make this possible he said the SA Local Government Association has ordered municipalities to start a strict debt collection and restructuring process.

Mabuza said a multi-disciplinary revenue committee, which includes Eskom, the departments of cooperative governance and traditional affairs, public works, minerals and public enterprises as well as Treasury will look at this debt challenge.

He said all Eskom debt bills had been paid buy national and provincial departments.

“Municipalities have paid. Some continue to default but this has improved the amount of money that has been collected.”

The active partnering model will assist Eskom in collecting revenue and help municipalities to install smart meters.

“Eskom owes more than R400bn to companies that are outside where it has loaned money. Eskom is battling to pay that amount. National Treasury is assisting it to pay that money and Eskom is trying to employ cost-saving measures to make money available and gradually it was getting out of the problem.”

The greatest challenge is that the money Eskom owes to funders stands at more than R400bn, which undermines the ability of its debt recovery.

Mabuza clarified that the model being extended to the top 20 affected municipalities are the ones entering into payment negotiations with Eskom.

“Eight municipalities have come forward to negotiate this partnering model and how it was going to work with those partners. Maluti-a-Phufong local municipality is close to signing, but what’s important in this model is that Eskom will assist the municipalities by using its own money to put in meters.

“National Treasury has made money available to assist municipalities to  put in meters so it can bill customers and the billing system can be credible so it can receive the revenue.

“Eskom will collect the revenue and ensure any ageing electricity infrastructure is fixed, collect the revenue and give the municipality what it is due to it and take what is due to Eskom until such time they have resolved the debt.”

Thereafter the two parties will part ways and the municipality will continue to run its business and handle its revenue collection.

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