HomeIndustry SectorsFinance and PolicyDebt owed to Eskom triples to R700 million

Debt owed to Eskom triples to R700 million

Power lines delivering
to customers “’ but many
have not paid Eskom
Johannesburg, South Africa — ESI-AFRICA.COM — 01 February 2011 – Debt owed to South African national power utility Eskom has more than tripled to R700 million in eight months, with the key culprits being cash-starved local authorities that are struggling to pay their power bills.

Revealing this in a report here, Business Report says that while the power parastatal was unable to provide updated figures for debts owed by municipalities, the figure has rocketed from about R162 million in July last year. These outstanding municipal debts are believed to now be nearing R550 million. All levels of government owed almost R200 million in July last year.

The report adds that an extrapolation of figures indicates that about 85% of the total debt to Eskom has been notched up by the 283 municipalities around the country – although the main culprits are in the Eastern Cape and Free State.

In a hint of the debt mountain the entity faces, Public Enterprises Minister Malusi Gigaba released to Parliament the amount owed by departments. Traditionally the smallest contributor to the debt, they now owe a significant R50 million.

This is decidedly up on last year. In July, national and provincial departments owed a combined R26 million to Eskom, according to figures provided to Parliament by then minister Barbara Hogan. Combined provincial and national debt is believed to be about R100 million.

Local Government Research Centre director Clive Keegan said Eskom was not being paid by various municipalities because “those to whom they are supplying the power are not paying them”. This included businesses, households and some departments. The problem was compounded by municipalities that had “hugely ineffective” rates and service fee collection and billing systems.

“Even those ratepayers who want to pay are unable to do so,” said Keegan, a former Cape Town mayor, who noted that there was a culture of non-payment to municipalities.

Eskom has played down the implications of the debt monster it faced. It said the sharply rising debt quantum had been offset by a stellar growth in revenue from R54 billion in 2009 to R71 billion in 2010 “’ a consequence of price rises and increased power uptake by paying consumers. Thus the proportion of the bad debt had gone down in percentage terms.

Chief executive Brian Dames emphasised the apparent health of the figures. “Between March and September last year, the debt to revenue ratio actually dropped from 0.95%  to 0.87% (of revenue),” he said.

Putting a lid on concerns that the bad debt would cause the parastatal to battle to raise much-needed capital internationally, Dames said it was Eskom’s target to keep bad debt below 1% of revenue. The entity had not only achieved that but it had succeeded in lowering the debt ratio.