State must write off unpayable R100bn municipal Eskom debt, economist says

The state needs to write off almost R100-billion debt that municipalities owe to Eskom. In addition, government should inject human resource capacity while also increasing the

national budget allocation for municipalities.

 

Economist Duma Gqubule said this after Eskom revealed that municipal debt had ballooned to R98.5-billion in February 2025 from R74-billion in March 2024.

The state-owned entity warned that if there is no change in the status quo, this trend would impede Eskom’s financial sustainability.

 

The power distribution, transmission and generation monopoly noted that the gains from the debt relief programme aimed at reducing its overall debt from R400-billion to R250-billion could be neutralised within three years if the rising municipal debt trajectory is not curtailed. The parastatal raised concern that the significant growth in debt was attributable to provinces like Free State and Mpumalanga.

 

This emerged during the portfolio committee on electricity and energy week-long oversight meeting in Gauteng.

 

The committee key stakeholders, which included Eskom, the National Treasury, the Department of Cooperative Governance and Traditional Affairs, and the South African Local Government Association (Salga) met to discuss the growing municipal electricity debt crisis.

 

 The meeting was aimed at finding solutions on the pressing challenges affecting municipalities’ ability to meet their financial obligations and sustain electricity.

 

 “There is no option but for the government to write off this debt and reimburse the municipalities. These entries are within the state balance sheet, and the municipalities need further support. I would say government should pay the municipal debt to Eskom in three instalments,” he said.

 

 Gqubule said the finances of the distressed Free State and Mpumalanga municipalities show that they will never be able to pay the Eskom debt.

 

 “The thing is that the investment that we need from municipalities and Eskom need to free up space from that balance sheet in order for that to attract foreign investment. Our country needs breathing space from the Eskom and municipal balance sheets,” he said.

 

 Portfolio committee chair Nonkosi Mvana in a statement emphasised the

seriousness of the situation, noting that the escalating municipal debt affected not only

Eskom’s financial stability but also the delivery of essential services to millions of South Africans.

 

 Mvana said during the discussions over 160 municipalities were classified as financially distressed, with 98 of them operating on unfunded budgets in the 2024/2025 financial year, seven of them participating in the Municipal Debt Relief Programme, and 14 of them having successfully met  conditions required for debt relief and write-offs. She said the municipal electricity debt crisis required collaboration and decisive action from all levels of government and stakeholders.

 

Eskom emphasised that as part of solutions to address the electricity debt crisis, funds collected from customers by the municipalities are prioritised to settle bulk electricity accounts before being used for other municipal expenses.

 

National Treasury underscored its efforts to enforce fiscal discipline through several interventions, including withholding equitable share allocations to defaulting municipalities under Section 216(2) of the Constitution. Treasury reported that equitable share allocations for several municipalities were withheld to compel them to address their financial management failures.

 

Despite these measures, Treasury acknowledged that entrenched dysfunctionality in many municipalities continues to undermine progress, also highlighting that only a fraction of the 10 million indigent households identified in the census are benefitting from the Free Basic Electricity grant due to inefficiencies in municipal administration, leaving millions of impoverished South Africans without critical energy support.

 

Salga highlighted that the overly fragmented approach to addressing municipal debt must be replaced with integrated capacity-building programmes, including technical assistance for cost-reflective tariffs and improved revenue collection systems.

 

The committee also heard that smart metering solutions have shown promising results in improving revenue collection.

 

National Treasury announced that an additional R650-million would be allocated in the next financial year to expand smart metering programmes to targeted municipalities.