Rising municipal debt threatens Eskom’s restructuring effort

Billions of rands that South African municipalities owe Eskom are hindering the state-owned power utility’s plan to restructure and separate its distribution unit, according to chair Mteto Nyati.

South Africa’s municipalities owed Eskom R95.4 billion by November as they struggle to collect revenue from customers and available funds are sometimes misappropriated after years of mismanagement. 

Eskom completed the unbundling its transmission business last year, a major step in the process to restructure and split the utility into three units. That means the focus now turns to the separation of the distribution arm. 

“The municipal-debt challenge has the potential to jeopardise the distribution separation as well as threaten the financial viability and sustainability of the future distribution industry,” Nyati said in Eskom’s 2024 annual report.

The National Treasury in 2023 announced a debt-relief program to write off Eskom’s debt, provided municipalities adhere to set conditions. The uptake on that has been slow