Municipal debt stunts Eskom distribution efforts, says minister of electricity

Municipalities’ R63.2-billion debt is causing significant challenges for Eskom’s energy distribution, generation and transformation mandate, according to South African Minister of Electricity Kgosientsho Ramakgopa.

Addressing the media in his weekly briefing on Sunday morning, Ramakgopa said 20 municipalities accounted for 77% (R48-billion) of that amount. The annual interest on the total debt works out to about R4.7-billion

“We are adding more and more debt to Eskom and undermining Eskom’s ability to invest their money in the generation, transmission and also distribution as we are still in the exercise of creating unique entities that report to the group that is called Eskom. This just adds to the bottom line of eroding Eskom, as Eskom is not in a position to respond to these challenges because of the fact that this is throttling its ability to respond. 

“A significant amount of work is being done to address these challenges. As I speak to you, there are communities that don’t have electricity; not because of load shedding, but because of failures of transformers and substations,” the minister said.

Ramakgopa cited the Vaal area where Eskom had installed 680 transformers. Of those, 367 had to be replaced and 313 were in the process of being replaced. The minister said he was concerned that the transformers that had to be replaced had been failing repeatedly, affecting Eskom’s budget for maintenance, which became concentrated in one area or region.

Read more in Daily Maverick: Baba Biblos Lebona and his ‘task team’ guard their Eskom substation against cable theft, 24/7 — without pay

Daily Maverick reported earlier this year that Johannesburg’s City Power had spent 80% of its budget for the entire financial year on replacing mini-substations that had been damaged as a result of cable theft and vandalism. The damage was blamed on lengthy blackouts, which created the perfect opportunity for thieves to vandalise the infrastructure. The number of mini-substations replaced by January 2023 stood at almost 300, costing the municipality R200-million.

Read in more Daily Maverick: City Power Joburg has already spent 80% of its budget thanks to blackouts, thieves and vandals

“This is prevalent across the length and breadth of this country, and this is a conversation that we are having with our colleagues from distribution, National Treasury and Salga [South African Local Government Association], to find a sustainable solution of ensuring that we undermine non-technical losses; people that are just consuming and not paying,” Ramakgopa said.

“Of course there are those who are indigent and there is a package directed to those people so they get a threshold of free electricity over a period of time. But essentially, we are talking about those who can afford to pay and are not paying, and those who are making illegal connections that are overburdening the infrastructure; hence we are seeing an increased rate of failure,” he said.

Ramakgopa said the overburdened infrastructure had implications for the Notified Maximum Demand – the contracted amount of electricity that the municipality requested from Eskom. He said that once this demand was exceeded because of illegal connections and lack of payment, it caused substations to fail, leaving the indigent, businesses and paying residents negatively affected.

Some businesses have, as a result, publicly stated that they are considering relocating because the infrastructure is unable to meet electricity demand. This has an impact on job security, which results in migration, which in turn means that municipalities lose revenue. 

Arrangements are being made to address municipalities’ lack of payment to Eskom. The minister said 28 payment plans with municipalities were in place. He reiterated, however, that the financial instability of municipalities was having a great impact on distribution and transmission. 

Ramakgopa reported that the decarbonisation programme, which the private sector had shown a great appetite to invest in, had 66GW of projects in the pipeline at various stages of development. He said solar PV in households was growing and that the ministry was working on wheelings, the emergence of microgrids and the digitisation of grid systems. 

“We’re still working on finding the answers on how to resolve [municipal debt]. But the comfort we want to give to communities is that we are attending to all of these problems. We are not waiting to resolve load shedding and then much later resolve the distribution side: we are addressing the entire ecosystem so that we have a foolproof comprehensive solution on the resolution of the energy problem in the country,” Ramokgoba said.

Also on Sunday, Minister of Public Works and Infrastructure Sihle Zikalala said the department urgently needed to acquire land to expand Eskom’s transmission infrastructure. According to the minister, Eskom submitted 45 requests, with 25 approved for 144 hectares. Six other requests from Eskom are at the valuation and feasibility stage.

To fast-track such requests from Eskom and Independent Power Producers (IPPs), the ministries of Public Works and Infrastructure and Electricity have formed a task team to facilitate expropriation applications. 

“The department is also dealing with requests for servitude for portions of land from the Independent Power Producers on state land. Two IPPs have made applications with one requesting approximately 19ha and another with an extent of 13ha. We are processing these requests and we will subject them to a conveyancing process by the department,” Zikalala said. DM