Eskom Moves to Stabilise Municipal Debt Through Distribution Agreements
Following a legal consultation process that began in March, nine South African municipalities have taken steps to formalise distribution agreements with Eskom. The utility says the arrangements are intended to address a mounting municipal debt burden that now exceeds R111.6 billion and continues to grow.
Background: Growing Municipal Debt
Municipalities across the country have struggled to meet their electricity payment obligations for extended periods. In some cases, arrears have persisted for at least 18 months, prompting Eskom to initiate legal action under the Promotion of Administrative Justice Act (PAJA). The utility has stated that non‑payment, failure to comply with the municipal debt relief programme administered by the National Treasury, and a perceived financial risk to the grid were the primary reasons for launching the proceedings.
Legal Framework: Promotion of Administrative Justice Act
The PAJA process requires that affected communities and stakeholders be given an opportunity to comment before any further steps—such as power interruptions—can be taken. This procedural safeguard aims to ensure that administrative actions are lawful, reasonable, and procedurally fair. Eskom has highlighted that the act not only protects the rights of municipalities but also provides the utility with a clear pathway to enforce payment obligations while maintaining system stability.
Nine Municipalities Sign Distribution Agreements
After the consultation phase, the following municipalities adopted council resolutions authorising distribution agreements with Eskom:
- Nketoana
- Mpofana
- Masilonyana
- Nala
- Ngwathe
- Renosternberg
- Thembelihle
- Govan Mbeki
- Kgetlengrivier
A council resolution is a formal decision taken by a municipal council through an official vote, authorising a specific action on behalf of the municipality. Under the agreed framework, Eskom will work with each municipality for a defined period, providing support in billing, electricity infrastructure maintenance, and debt collection.
Implementation and Support Provided by Eskom
Eskom officials say the agreements are already being implemented. The utility’s involvement includes:
- Assisting with accurate meter reading and billing processes.
- Conducting routine maintenance on distribution networks to reduce technical losses.
- Deploying dedicated teams to improve debt recovery rates.
By taking on these operational responsibilities, Eskom aims to improve cash flow for the municipalities while safeguarding the reliability of the national power supply.
Other Recent Arrangements: Ekurhuleni and Inxuba Yethemba
In addition to the nine distribution agreements, Eskom has reached separate arrangements with other local authorities. The City of Ekurhuleni negotiated a payment plan that led Eskom to withdraw its earlier notice of a potential power cut. Meanwhile, the Eastern Cape municipality of Inxuba Yethemba entered into a prepayment agreement, whereby electricity is supplied based on advance payments made by the municipality.
Continued Risk: Three Municipalities Face Possible Power Interruptions
Not all municipalities have been able to provide workable solutions. Dr. Beyers Naude (Eastern Cape), Kai Garib (Northern Cape), and Mamusa (North West) failed to submit representations that satisfied Eskom’s requirements following the PAJA notices. Consequently, the utility has issued final notices indicating that power interruptions could commence on 8 May, although Eskom notes that discussions are ongoing and commitments may still be reached.
Eskom’s Perspective and Future Outlook
Agnes Mlambo, acting group manager for sales at Eskom, emphasised the broader implications of settling municipal debt:
“Repaying municipal debt allows Eskom to provide consistent electricity supply and invest in our infrastructure, enabling businesses to protect and create jobs and reduce reliance on the exchequer.”
She added that, while progress has been made through the distribution agreements and payment arrangements, rising municipal debt remains one of the utility’s most significant challenges. Eskom says it will continue to engage with communities, stakeholders, and municipal councils as part of its ongoing effort to secure financial sustainability and maintain grid stability.
The utility’s broader capital plans—including a projected R343 billion investment over the next five years—are contingent on improving revenue streams, of which municipal payments are a critical component.
