Defaulting municipalities that want their Eskom debt scrapped will have to collect electricity revenue from consumers and play hardball by cutting them off when they default if they are to benefit from the National Treasury's municipal debt relief initiative.
Aside from the several administrative conditions listed by Treasury, among the more substantive conditions is that municipalities will have to pay their Eskom current account within 30 days. They will also have to table a funded budget and will not be allowed to table a deficit or use accounting mechanisms, such as depreciation, to hide an operating deficit. Municipalities will have to cut their trousers to the size of their cloth and make realistic revenue projections.
But by far, the biggest challenge will be the condition that municipalities must collect service charges from their customers.One of the primary reasons municipalities do not pay Eskom is because they are not collecting, and coupled with that is the consumer culture not to pay. But municipalities need to collect water and electricity charges … If these are not paid, then the municipality must cut the person's electricity and restrict the supply of water.
Revenue from water and electricity will have to be ringfenced into a separate bank account. Funding from the Treasury intended for free basic services for indigent households must also be deposited into this account. In the past, there has been evidence of municipalities failing to pass on free basic service subsidy transfers, which have been used for other purposes. A deep dive into the big business story of the week, as well as expert analysis of markets and trends.