Chairman Mteto Nyati has stated that the substantial debt of billions of rand owed to Eskom Holdings by South African municipalities is hindering the state-owned power utility’s plans to reform and divide its distribution sector.

As of November, municipal debts to Eskom were reported to be R95.4 billion ($5.1 billion), compounded by challenges in revenue collection from consumers; in some cases, funds have been improperly allocated due to years of mismanagement.

Eskom made significant progress last year with the successful unbundling of its transmission division, a key step in its strategy to restructure and split the utility into three independent entities. The next priority is to separate the distribution sector.

In Eskom’s 2024 annual report, Nyati stated, “The issue of municipal debt presents a major risk to the separation of the distribution unit and could jeopardize the financial stability and sustainability of the future distribution framework.”

In 2023, the National Treasury launched a debt-relief program aimed at alleviating Eskom’s financial burdens, dependent on municipalities fulfilling certain criteria. However, involvement has been slow, with numerous councils facing difficulties in implementing the needed credit controls.

Nyati voiced his concerns, saying, “The board is deeply troubled by the failure to comply with the municipal debt-relief initiative, particularly since the program’s stipulations prevent Eskom from taking action against non-compliant municipalities.”

Chief Financial Officer Calib Cassim highlighted in the report that Eskom has urged the National Treasury to engage directly with municipalities that are not compliant to address issues of non-payment or delays in payments.

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