Municipalities' mounting debt threatens Eskom's return to profitability

CAPE TOWN - Eskom says mounting municipal debt is threatening its return to profitability with municipalities now owing the power utility R95 billion.

Releasing its latest financial results for the 2023/24 financial year on Thursday - the power utility has reported a R55 billion after-tax loss - double that of the previous financial year. 

With municipal debt rising on average by more than R3 billion every month Eskom estimates it could reach as much as R110 billion by the end of the current financial year - which ends in March.

Electricity Minister Kgosientsho Ramokgopa says municipal debt to Eskom is proving to be an existential crisis. 

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It’s increased by R20 billion since the end of the financial year which ended on 31 March to the present. 

“It’s not an Eskom problem. It’s a sovereign problem because someone much later has to pay for this. And of course, it will be left to the diligent customer because it’s going to find its way in the tariff application and or require some fiscal support and what that means, the taxpayer is overburdened,” explained the minister.

Ramokgopa says he will announce interventions in the first quarter of the new year aimed at arresting the problem. 

Emalahleni, Maluti-a-Phofung and Emfuleni municipalities remain the top three culprits, all of whom are part of the government’s debt relief programme.

“What we know is that municipalities are not in the position to meet these obligations and therefore that debt is going to spiral,” said Ramokgopa.

Eskom says if the debt is not brought under control - it will not have benefitted at all from the debt relief it’s granted so far to the defaulting municipalities.