City of Joburg lambastes Eskom over R1bn lawsuit

Eskom is owed R4.7bn by Gauteng municipalities. Picture: Timothy Bernard Independent Newspapers

Eskom is owed R4.7bn by Gauteng municipalities. Picture: Timothy Bernard Independent Newspapers

Published May 8, 2024


By Nicola Mawson

A war of words has erupted between the City of Joburg and Eskom as the municipality has blasted the state-owned power utility for taking it to court over a more than R1 billion debt.

In a statement yesterday, the City said it was “taken aback by Eskom’s decision to drag the courts into forcing it to pay an amount of R1bn, while the national power utility owes R3.4bn in overcharges over the years”.

This comes after Eskom on Monday announced that it had no choice but to take the City of Joburg-owned electricity utility, City Power, to the Gauteng High Court, Johannesburg, over its R1bn in debt.

According to SA News, a government news agency, Eskom is owed R4.7bn by Gauteng municipalities.

However, Eskom said City Power started defaulting on its payments in October last year.

“The debt owed by City Power has reached unprecedented levels, exacerbating Eskom’s already strained financial situation,” Eskom said.

“This dire situation not only undermines Eskom’s financial sustainability, but also threatens its ability to maintain essential infrastructure, invest in new technologies and meet the growing energy demands of the province.”

The court hearing between Eskom and City Power will be held on June 4.

However, the City of Joburg states that it pays Eskom about R1bn for electricity monthly.

“The City remains committed to paying for services rendered and validated as due, as it always has,” it said.

The two parties are in talks about the alleged overbilling, with the City having suggested that an independent party be brought in to resolve the issue, which it said Eskom was reluctant to do.

Eskom, which reported a net profit after tax of R1.6bn in its results to September, down from R3.8bn, is not sustainable when municipalities and government departments don’t pay their bills.

Energy analyst Chris Yelland said Eskom was increasingly going after municipalities to force them to pay up.

As at the end of March, Eskom was owed R74.4bn by municipalities nationwide.

Johannesburg is just one of the municipalities to be sued.

Yelland said Eskom has also acted against the City of Tshwane among other municipalities.

He said that debt owed to Eskom increases at R1bn a month, and it’s not just municipalities that are in arrears, but also government departments.

“It’s astounding how much municipalities are in arrears,” Yelland said.

“This affects Eskom’s financial position in terms of cash flow. It affects the whole business sustainability.”

In October last year, Bloomberg reported that the City of Tshwane owed Eskom R3.2bn, which accumulated in July and August due to erratic payments, while Ekurhuleni was R1.5bn in debt.

Although 70 municipalities were approved under the Eskom debt relief programme introduced by National Treasury in 2023, Yelland said many were battling to meet the requirements to have their debt written off over three years, such as municipalities enforcing strict credit controls, paying their monthly electricity accounts, and enhancing revenue collection.

Tshwane’s bid has reportedly failed.

As a result of the debt, Yelland said it was not possible to expect Eskom to do its job properly.

He pointed out that the debt means that the power utility must ask National Treasury for more cash, which effectively means that taxpayers are paying twice for power.

In July last year, the Eskom Debt Relief Act was promulgated, allocating R78bn to Eskom in the 2023/2024 financial year, followed by R66bn in the 2024/2025 financial year and R40bn in the final year of the three-year programme.

However, this relief comes with strict conditions, such as no new funding for Eskom for the duration of the deal, apart from certain aspects such as greenfields projects.

In February, National Treasury proposed reducing the relief amount by R4bn as Eskom has yet to spin out its finance company as part of it splitting out its units into separate companies.