South Africa’s state electricity supplier has admitted that non-payment for electricity by the black community combined with incompetent management is the reason why the utility company is on the brink of collapse.
The admission that bad debt and mismanagement are to blame for the crisis is contained in the Electricity Supply Commission (ESKOM) interim results issued on January 30, 2018.
According to those results, the company’s arrear debt “due by “municipalities,”—that is, the local authorities who purchase power in bulk and then resell it to consumers—increased from (South African Rand) R9.2 billion in 2016 to R12.4 billion in 2017.
The failure of local authorities to pay Eskom for power is itself due to the refusal of end consumers to pay their electricity bills, and local corruption and incompetence which has marked those structures.
In addition, “small power users,” (SPU) owe Eskom R2,568 million, with R902 million of that now immediately overdue, while the famous black township of Soweto—counted as a separate SPU because of its size—alone had an outstanding bill of R5,668 million, of which R5,425 was immediately overdue.
This was a R400 million increase over the previous year—meaning that the power usage in the township is increasing dramatically while fewer and fewer are paying.
In total, the Eskom interim results reported, as of September 30, 2017, the utility supplier had bad debts of R40,310 million, of which R19, 410 million was immediately overdue.
Eskom’s debt is now R367 billion, a R34 billion increase from a year ago, and that its debt-to-income gearing is now 70 percent—an utterly unsustainable level.
In addition, the interim results said, the new board—appointed only a few weeks ago—is “dealing with executives facing allegations of serious corruption and other acts of impropriety.”
Finally, the report concluded, the company would have to increase its prices if it wanted to surive, saying that “financial sustainability cannot be achieved through cost savings alone,” and that the “price of electricity must migrate to a more appropriate level.”
Eskom’s situation is in fact so bad that it is only still operating after receiving what local media called a “lifeline” on Monday this week when the Public Investment Corporation (PIC)—on behalf of the Government Employees Pension Fund (GEPF)—agreed to grant it a short term loan of R5 billion.
The money has however only provided a very short term reprise, as it will fund the company’s operations for the month of February 2018 alone.
The new Eskom chairman, Phakamani Hadebe, said at the time of the release of the interim results that the company actually needed at least R10 billion immediately and another R10 billion by the end of February if it was to keep operating.
Hadebe added that “what has broken the back of the camel which is Eskom,” was firstly last year’s qualified audit report, which was primarily due to “irregular expenditure, and poor leadership.”
“Eskom will now have to convince auditors at the end of the year that it is a going concern,” he said.