Electricity consumers will not be getting any relief from the more than 18% tariff increase as the government aims to use a portion of this hike to reduce the debt owed by municipalities to Eskom.
ELECTRICITY consumers will not be getting any relief from the more than 18% tariff increase as the government aims to use a portion of this hike to reduce the debt owed by municipalities to Eskom.
This was revealed by the Deputy President Paul Mashatile to the National Council of Provinces in Parliament on Thursday.
Mashatile was replying to oral questions relating to the municipal debt to Eskom and water entities, illegal electricity connections, critical economic infrastructure sabotage, and animal vaccine shortages, among others.
The debt owed by municipalities to Eskom stood at R56.3 billion at the end of December 2022, and the debt is rising each month.
Mashatile reiterated that the government has introduced a debt relief package for Eskom intended to improve the utility’s balance sheet, while proposing that Eskom writes off some of the municipal debt under strict conditions with guidance from the National Treasury.
This month, the National Treasury published the Municipal Finance Management Act Circular no 124, which deals with the relief strategy regarding a municipal debt owed to Eskom.
This came after the National Treasury agreed to shoulder a R254bn burden of Eskom’s R430bn mounting debt, with strict conditions, over three years in a bid to shore up the utility’s balance sheet.
Mashatile, however, said the government recognised that debt relief alone would not return Eskom to its financial sustainability, and pointed to the increase in electricity tariffs as a key factor in the success of Eskom’s debt relief.
In January, the National Energy Regulator of South Africa (Nersa) agreed to an 18.65% increase in electricity tariffs, effective from April 1 this year.
Municipalities, however, will realise a lower increase of 18.49% as their financial year only starts on July 1 and the increase will not apply in the first three months (April to June).
“A key assumption considered in the debt-relief determination is the implementation of the recent tariff increase approved by the regulator – an increase of 18.65% in 2023/24 and 12.74% in 2024/25,” Mashatile said.
“Without these increases, the debt-relief arrangement is not sustainable. In the immediate, we have been helping municipalities to pay debts owed to Eskom and water boards.”
Mashatile said the Municipal Debt Relief would be conditional, and application-based.
He said this relief was aimed at correcting underlying behaviour and operational practices in defaulting municipalities.
Municipalities and water boards are also responsible for 65% of the debt to the water trading entities, of which R10.9bn is overdue by more than three months.
Mashatile said the escalating debt in the water sector was attributed to the absence of economic and regulatory regimes for infrastructure investment, costing and pricing, non-payment of services, and unauthorised connections.
“Hence, parallel to this process Eskom is introducing a smart metering solution to change consumer behaviour by reinforcing a culture of payment for services rendered,” he said.
“The culture of non-payment, not only by municipalities but also by all organs of state and individual household customers, is concerning.
“As the government, we cannot over-emphasise the need to enforce the culture of payment for services rendered.
“The success of all these relief measures is dependent on co-ordination across all spheres of government.
“This is why the government will continue working with all sectors of society to increase and build sustainable economic activities in all municipalities to create viable tax bases to develop revenue for social and economic development.”