Emfuleni Local Municipality debt continues to accumulate

Monday, 28 February 2022: During July 2018, Eskom took a decision to interrupt the electricity supply to the Emfuleni Local Municipality due to non-payment of their electricity account, which at that stage was in arrears by close to R900 million. The decision came after the municipality had already consented to a judgment in March 2018, admitting liability towards Eskom in the amount of R614 million.

Despite the aforesaid judgment and an agreement to pay Eskom the current monthly account, the municipality simply failed to honour their undertaking and obligation in terms of their licence conditions and continued with their non-payment of the current electricity account.

As a result, Eskom took the decision to terminate the electricity supply to the municipality, which led to a court process in which the court ordered several big industry role players and consumers of electricity within the municipal boundaries, to bypass the municipality and pay Eskom directly. This order was appealed by the municipality without any success and remains in place until today. The municipality was also ordered to provide a breakdown of amounts owed to Eskom on the invoicing which they have failed to do to date. This then resulted in a contempt of court application by Eskom against the municipal manager and the Chief Financial Officer (CFO), which application is still pending.

Despite the aforesaid order being in place, the municipality continued with their complete disregard of their licence conditions and simply failed to make a substantial payment to Eskom despite the fact that their financial results revealed an increase in electricity sales of about R500 million and a collection rate of almost 90% on their electricity sales.

The audited financial statements compiled by the Auditor General of South Africa also revealed that the municipality incurred nearly R1 billion in unlawful expenditure over the same financial period.

As a result of the continual non-payment, the Eskom debt continued to accrue, which prompted Eskom to bring a further court application. In this application, Eskom seeks an order for a further 200 companies to pay Eskom directly and that the municipal manager and CFO be held in contempt for their failure to comply with the various court orders in place.

Eskom also supports a further application which was brought by the large consumers in the municipality for the municipal electricity distribution licence to be revoked and transferred to Eskom because of the municipality’s failure to comply with its own licence conditions and its total failure to maintain the electricity infrastructure within the municipality. If successful, this will result in a takeover of the electricity network within the municipality by Eskom.

Over and above, Eskom also instituted action against the municipality for the recovery of nearly R1,4 billion and was granted judgment in its favour during the end of 2021. This effectively granted Eskom the right to issue writs of execution against municipal assets for the recovery of the judgment amount. Instead of negotiating a favourable repayment plan with Eskom, the municipality elected to embark on numerous legal processes to prevent Eskom from collecting the amount due to it in terms of the court orders. The legal process is ongoing, and a full bench appeal will be heard on 24 March 2024 to determine if Eskom is allowed to proceed with the execution of its orders.

Currently, the municipal debt in Emfuleni has grown from R614 million in March 2018 when they first agreed to an order being made against them, to R4,4 billion as of February 2022, where R332 million is debt aged between 30-90 days.

Even with court orders in place, the municipality failed to make payments when they were due in terms of the various judgments, which prompted Eskom on more than one occasion to attach bank accounts to recover the amounts due to it. It has also prompted Eskom to attach the municipal assets during March 2020 which was met by an urgent application from the municipality of which they lost.

As a result of their failure to prevent Eskom from executing against the municipal assets, the MEC for Local Governance was approached on an urgent basis by the municipality to assist with a “bailout” which culminated in an amount of R50 million being paid to Eskom with further promises to pay. To date, the promises have come to naught and the total municipal debt across South Africa has escalated to nearly R43 billion.

“Eskom is attempting all legal and other avenues at its disposal to collect the monies owed to it and will continue to do so until the full outstanding debt has been recovered from Emfuleni Local Municipality”, says Daphne Mokwena, Senior Manager Customer Services in Gauteng.


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