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South Africa’s government has warned that power utility Eskom is facing an “existential crisis” after the amount of unpaid bills owed by local municipalities surged to a record R95bn ($5.2bn).
The comment by Kgosientsho Ramokgopa, minister for electricity, overshadowed financial results that showed that the company’s losses had narrowed and that it was on course for its first annual profit since 2017, while the company celebrated 260 days without rolling power cuts.
Eskom, which provides 90 per cent of South Africa’s electricity, has had to implement rolling blackouts, known locally as load-shedding, sparking public anger that contributed to the ruling African National Congress losing its absolute majority in elections earlier this year.
Ramokgopa said Eskom’s progress could be undermined by a 28 per cent jump in the amount owed by municipalities since March, threatening the utility’s financial stability and its ability to improvement its infrastructure.
“This is an existential problem facing Eskom,” he told a media briefing on Thursday. “This is not an Eskom problem; it’s a sovereign problem, because someone much later has to pay for this.”
Outstanding municipal debt for power has jumped from R74.4bn at the end of March to R95bn currently, and is forecast to hit R110bn by the end of the first quarter, Ramokgopa said. Money owed by the City of Johannesburg, South Africa’s economic powerhouse, jumped by almost 400 per cent.
Dan Marokane, Eskom chief executive, blamed South Africa’s weak economy, which had left many residents unable to pay for services, and mismanagement at municipalities for the payment crisis, which has also led to water boards not being paid by some councils.
“In some of those municipalities, there is a lack of strong leadership in terms of doing what’s right,” he said. “The money for electricity has been collected from residents, but has been used by those municipals officials for other purposes.”
Eskom, Africa’s largest power utility with annual revenues of R295bn, has racked up steep losses in recent years as a number of its ageing power stations have broken down, reducing electricity sales and forcing it to burn expensive diesel to keep the lights on.
Eskom on Thursday reported a R55bn loss after tax for the year to March, which included a one-off charge of R36bn from unbundling its transmission unit. While chair Mteto Nyati said this was an “exceptionally poor performance”, the pre-tax loss fell to R25.5bn, from R34.6bn.
Marokane said halting blackouts had dramatically improved the company’s fortunes, so much so that the utility was now expecting to make a profit of more than R10bn in the year ending in March.
Nyati told the Financial Times this year that the utility had been able to reverse the power cuts by focusing on maintenance of its six worst power plants, overhauling their management.
But the suspension of the blackouts came too late to help the ANC retain its parliamentary majority, with its share of the vote collapsing to 40.2 per cent in May’s elections, forcing it to form a coalition with nine other parties.
Eskom’s problems extended beyond its fragile power plants as the utility, a source of public contracts worth billions of rands, became a breeding ground for corruption during former president Jacob Zuma’s time in office.
McKinsey this month pleaded guilty in a US court to bribing officials at Eskom, and paid a $122mn fine. Marokane said 304 arrests had been made in relation to corruption at Eskom, with 17 people convicted so far.
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