South Africa has been treated to the dire state of indebtedness of the municipalities to Eskom; the cost of sales being catastrophically elusive to the obvious detriment to the country’s established goals.
Municipalities owe Eskom an amount of approximately R10.2 billion, which is currently overdue. This amount contributes about 42 percent to Eskom’s total sales and 41 percent of Eskom’s revenue annually. Juxtapose this staggering picture against the global whims and you get a corrosive future trajectory for Eskom, if this arrear amount is not rolled back.
In December 2016, the rating agencies downgraded Eskom to the significant uncertainty regarding cash flows and tariff due to the Regulatory Clearing Account court case, among other reasons. Our liquidity position has similarly been downgraded. By virtue of its enviable location in the socio-economic life of South Africa, Eskom is a walking afflicted juristic person owing to the emotions and interests it evokes with each stride.
While we are impelled to keep a keen eye on the global investor community, we have to ensure that we don’t lose sight of our economic profile, as a country, and all its innate permutations. Our challenges transcend those who need electricity to launch themselves out of poverty to a better life, to the upper-crust, whose headache is to wrong-foot other captains of industry elsewhere in the world.
A fine-balancing act isn’t always fine enough to guarantee safe landing for all our stakeholders. Unlike most organisations that are able to quietly wrestle with their challenges, Eskom misses that bliss as whatever impact is felt by the company bears on the citizenry.
This point was made during the unfortunate load shedding season, which, thanks to the South Africans and Eskom’s turnaround strategy, we were able to obliterate. It was an outsize challenge requiring collective combat!
Back to the R10.2 billion arrear amount! Since the commencement of the Promotion of Administrative Justice Act process, we have seen commendable co-operation among stakeholders; we have been receiving part payments and signing payment agreements. Needless to mention the fact that Eskom is a national asset which virtually rests on the shoulders of each citizen. Therefore, its sustainability equally rests on the contribution by the nation’s citizenry.
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Eskom has not rested on its laurels in the face of the mounting debt. It engaged all relevant stakeholders, sought to entice municipalities through a “carrot” of suppressed interest on the overdue amount. Further, while relevant laws and agreements permit us to apply 100percent electricity withdrawal against the non-paying municipality, we opted for a softer approach of interruptions for a few pre-announced hours daily.
Judge Hans Fabricius of the North Gauteng High Court agreed with us, when he dismissed the Afriforum’s application that Eskom had consulted widely, over an extended period of time. Empathising with our interruptions, as opposed to total electricity withdrawal, he urged that Eskom’s position must be considered within the context of the broader economy.
Interruptions stem from our duty of care; a responsibility grounded in our acute appreciation of South Africa and, particularly, its contradictory profile. We have to care! Our past eggs us on to care, so that we can eventually succeed in reconciling our past and the future.
But one fact is inescapable. Eskom’s ability to supply electricity will be rendered obsolete if non-payment, by municipalities escalates.
This will make insolvency inevitable, which will in turn exert a huge cost on the government and, by design, the citizens. It is a vicious circle we can tailor to a good story, as a nation. I urge all the defaulting municipalities to expeditiously honour their outstanding amounts as a contribution to the creation of a sustainable future for South Africa.
Dr Baldwin Ngubane is Eskom chairman.