Municipalities owe Eskom a complete of R82.3-billion in arrears, which the embattled state-owned energy utility is struggling to gather.
Eskom provides electrical energy to the municipalities, which in flip promote it on to households and companies — and each have seen a fast rise in excellent money owed. The overdue quantity owed to the utility has quadrupled over the past 5 years, irritating efforts to stabilise its funds simply as it’s making progress in bettering its operations and averting blackouts which have dogged the nation for years.
Eskom has resorted to a spread of strategies to gather its money owed, together with securing asset seizure orders. In 2020, it publicised how furnishings and autos owed by the Emfuleni municipality, one in all its greatest collectors, have been taken.
“To enhance income assortment, Eskom developed a debt-management technique, with one of many key interventions” being to enter into partnerships with municipal clients to actively assist them settle their money owed, the utility mentioned in a reply to questions. Solely 5 councils have entered into settlement agreements so far, it mentioned.
Political will is required to make sure municipalities perform extra effectively and are in a position to meet their obligations, and Eskom might reduce off their electrical energy provide till cost phrases are agreed, based on Olga Constantatos, head of credit score at Cape City-based cash supervisor Futuregrowth.
“If Eskom doesn’t accumulate, or if the debt is forgiven, Eskom’s monetary sustainability will probably stay in danger, they usually may have further capital injections or different monetary assist,” she mentioned. “Finally, taxpayers and residents bear the price of this.”
Debt aid
Nationwide treasury has stepped in with a debt-relief programme for 71 overburdened municipalities, which ought to finally assist R55-billion of Eskom’s arrears to be settled. Whereas some councils have been adhering to cost schedules agreed with the treasury, others had sunk deeper into debt, the utility mentioned.
Regardless of Eskom’s debt-collection points, buyers in its bonds have targeted on its improved operational efficiency and energy technology. The yield on the utility’s government-guaranteed tranche of greenback notes due in August 2028 traded close to the bottom ranges in practically two years on Tuesday, at 6.9%.
“The bonds moved fairly strongly as a result of the prospects for the corporate appear to be bettering,” with plant efficiency selecting up, mentioned Manuel Mondia, analysis analyst and portfolio supervisor at Aquila Asset Administration. The municipal arrears “remains to be a sizzling matter, however I consider the market remains to be hoping for additional measures or assist”, he mentioned. — Paul Burkhardt and Colleen Goko, with Ntando Thukwana, (c) 2024 Bloomberg LP
