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The deadline to apply for the Eskom municipal debt relief program has been extended to 31 October 2023. The program — which forms part of the government’s plan to write off historic debt owed by municipalities to Eskom.
The deadline to apply for the Eskom municipal debt relief program has been extended to 31 October 2023. The program — which forms part of the government’s plan to write off historic debt owed by municipalities to Eskom. Out of South Africa’s 257 municipalities, 136 owed the beleaguered utility R58.5 billion in arrears debt as of 31 March 2023. However, only 37 had applied to be part of the debt relief program by 22 September, 28 of which have been approved to participate so far. There are 25 additional applications pending with their respective provincial treasury departments for submission.
The municipal debt relief program was announced shortly after the treasury proposed that the government take over R 254 bn of Eskom’s staggering R423 billion debt. Restoring Eskom’s financial stability would go a long way towards addressing the energy crisis. The treasury previously noted that the municipal debt spiral posed a material risk to Eskom.
Eskom cannot write off any debt unless the treasury is satisfied that the municipality has met all 14 conditions for 12 consecutive months, after which the utility will clear a third of its debt. The program will run for three years. If a municipality fails to comply with the conditions, the benefits of the relief cease. The municipality will have to immediately start repaying its Eskom arrears, interest, and penalties and the power utility can resume any legal proceedings relating to the recovery of the debt.
Among other things, municipalities will have to demonstrate that they have paid their Eskom current accounts each month, aligning spending to realistic revenue projections and having cost-reflective tariffs.
Municipalities will also have to maintain a minimum average quarterly collection, collecting 80% of their revenue during the first year of the program, 85% during the second year, and 95% during the third. Where they are not able to immediately achieve these averages, municipalities will have to demonstrate why they are not able to do so. Provincial treasuries will have to closely monitor municipalities to ensure they comply with the conditions, certifying their compliance each month. A municipality that benefits from the relief is not allowed to borrow during the three-year period.
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https://trendsnafrica.com/eskom-rejigs-strategy-for-addressing-power-cuts/
The municipality will also have to ring-fence all electricity, water, and sanitation revenue in a separate account to its primary bank account. That revenue must be used to pay its Eskom current account first and then its bulk water account. Only then can the money be used for other purposes.
