Solly Phetoe
Alarm bells should be ringing across government at the real threat the deteriorating state of local government poses to Eskom and thus workers and the economy.
Eskom recently reminded the nation of the worrying state of municipal payments for electricity owed to it. This trend is getting worse and if not resolved, will be catastrophic.
The government put in place a progressive intervention package to help struggling municipalities settle their Eskom debt on condition that they keep up to date with future payments.
This R80 billion relief has helped 72 municipalities. Yet out of these, it has been reported that only 14 municipalities have honoured their agreement. Municipal debt to Eskom is said to be R82bn and projected to reach R100bn by the end of the financial year and R200bn by 2028.
Eskom, like any other company, cannot sustain such losses. Neither would the state be able to cover the gap given the many other pressing needs it has to address.
The municipal Eskom payments crisis is due to a myriad of issues. Part of it is consumers who don’t pay. Some because they simply do not have money, e.g. are part of the army of 42.6% of society who cannot find work or just cannot afford it due to the more than 600% increase in electricity tariffs since 2006 and the rising cost of living and needing to support unemployed relatives.
There are others, e.g. the wealthy, who do not pay because they are not on a prepaid system and municipalities are lackadaisical when it comes to collection. As has been seen in Tshwane and Joburg some of these are well-off hotels and diplomatic missions!
Government institutions too are amongst the defaulters.
In other instances, consumers do pay the municipalities, who then, because of their own financial crises, don’t transfer the monies to Eskom.
The end result is an Eskom bleeding up to R40bn a year. The tragic solution to date by Eskom is to outsource the bill for non-payment to the half of its customers who do pay and hence the continuous double digit tariff hikes since 2006, far outstripping inflation.
This has pushed those who can afford to abandon Eskom and go off grid to do so, further shrinking Eskom’s customer base, and thus squeezing its customers further. A vicious death spiral.
The Auditor-General’s reports on the state of local government are alarming. A decade ago, 10% of municipalities were in financial distress. Today it is 67%.
A few years ago, about 20 municipalities routinely failed to pay their workers, today it’s about three dozen. The recent Financial Sector Conduct Authority report on employers failing to pay their workers’ pension funds has expanded that group of delinquent municipalities to others.
We routinely see municipalities fail to spend infrastructure grants or provide basic services.
This has led companies to close, retrench workers and plunge already desperately poor communities further into poverty and despair.
The response of the Department of Cooperative Governance and the South African Local Government Association? PowerPoint presentations about some distant move to a district development model.
Eskom is correct to raise the alarm bell. As did Cosatu since 2019 when it was clear we were heading into very dangerous waters. This is precisely what motivated COSATU to draft the Eskom Social Compact that initiated the Eskom debt relief package but linked it to plugging its gaping financial holes.
Key to resolving this Eskom local government financial death spiral, is to move all consumers to paying Eskom directly in advance. This will ensure Eskom has the money it requires to provide society the reliable and affordable electricity all of life and the economy depends upon.
Eskom simply cannot continue to bail out bankrupt municipalities. Neither can workers and the economy continue to subsidise those who do not pay.
Yes, this means we must all pay for electricity upfront. Just like we do for any other goods we buy.
To cushion the poor, COGTA and SALGA must ensure all municipalities provide registered indigent households with their allocation of free electricity. The allocation should be increased to help meet basic needs and the processes to register be made easier. This must only go to indigent households and not the wealthy.
This will also necessitate a new funding model for local government. It will need to include compensating municipalities for their own electricity infrastructure costs as well as their use of electricity sales to cross-subsidise other municipal services.
Equally, the government's 140 municipalities' capacitation programme must be expedited to end the disaster where some return billions of rands worth of infrastructure grants unspent as they simply lack the capacity to spend it.
National and provincial government need to help ensure municipalities appoint persons with the necessary skills and integrity too.
These are not easy matters to fix. But to continue on the path of PowerPoints, meaningless platitudes, interminable dates and praying things will improve, is little better than playing Russian Roulette with a loaded gun. It will end in tears.
If we continue as is, more municipalities will stop paying staff and providing services. More companies will close and retrench. Eskom will continue to bleed billions. The state will be forced to cut funding for schools, hospitals, police stations, home affairs, universities among other critical frontline services; to bail out Eskom and countless municipalities.
The situation requires bold and decisive leadership. Eskom, just like the South African Revenue Service has shown that the state can be fixed and quickly. Appoint competent management, remove criminals, fill critical vacancies, pay staff a living wage, tackle corruption, fill the leakages and invest in infrastructure and capacity; and the state can provide the public and municipal services that workers, society, businesses and the economy depend upon, and if delivered will thrive with.
The government led by the ANC will soon table the Medium-Term Budget Policy Statement at Parliament. It needs to tackle these crises with a bold set of interventions to ensure they are rapidly overcome.
Solly Phetoe is General Secretary of Cosatu
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