Eskom threatens total power cut to Johannesburg over R5bn debt – with OUTA CEO Wayne Duvenage
Eskom is threatening to cut off Johannesburg's electricity due to the city's mounting debt, now at R5 billion. Speaking to BizNews editor Alec Hogg on this morning's BizNews Briefing podcast, OUTA CEO Wayne Duvenage highlighted a growing crisis of municipal mismanagement and warned of severe consequences if leadership doesn't change course. Civil society's frustration is boiling over, and drastic action may be imminent.
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MEDIA STATEMENT: Eskom serves notice of power interruption against City of Johannesburg and City Power
Eskom today served a notice of intention to interrupt power supply to the City of Johannesburg (CoJ) and City Power at certain pre-determined times of day in accordance with the Provision of Promotion of Administrative Justice Act (PAJA).
The CoJ and/or City Power currently owe Eskom an amount of R4.9 billion, excluding the current account of a further R1.4 billion which will become due and payable at the end of November 2024.
Despite all the avenues that Eskom explored and efforts to accommodate the CoJ, the matter has reached a point where Eskom can simply no longer afford to accommodate the CoJ without putting further financial strain on and harming its own business. In terms of the Constitution and the Intergovernmental Relations Framework, the CoJ is supposed to cooperate and assist Eskom with fulfilling its mandate of ensuring that citizens have access to affordable electricity. The CoJ has breached these obligations by not paying Eskom for the bulk electricity it supplies, making it almost impossible for Eskom to fulfil its mandate.
When entities like the CoJ fail to pay Eskom timeously or at all, it forces Eskom to borrow additional money at premiums to fund operational costs. Operational costs should be funded by revenue generated from electricity sales and not by borrowings. Borrowing money to fund operational cash shortfalls caused by the failure of municipalities such as the CoJ to pay Eskom for bulk electricity increases the costs of providing electricity exponentially. The failure to pay by the CoJ is contributing to the growing municipal debt which, as at the end of September 2024, stands at R90 billion.
Eskom's financial sustainability and ability to supply electricity at affordable prices is contingent upon its ability to improve its balance sheet by increasing revenue and reducing expenses. Revenue can only be increased by collecting electricity debts and/or increasing electricity tariffs.
The CoJ has acknowledged its indebtedness to Eskom, but it refuses to pay the full amount of its monthly bill. The CoJ alleged, without substantiating their claim, that Eskom is overbilling it on some of its supply points. It is for this reason that the CoJ is applying set-off against the monthly bills raised by Eskom, which is contrary to the electricity supply agreement and the agreements reached with its Chief Financial Officer (CFO), Rendani Sadiki, and the Chief Executive Officer (CEO) of City Power, Tshifularo Mashava, and City of Johannesburg Management. In more than one meeting, it was agreed that the CoJ would continue to pay whilst the alleged overbilling is investigated; this undertaking has been reneged on.
For the reasons mentioned above, on 8 November 2024, Eskom will be issuing a public notice inviting all interested and affected parties to submit written representations, comments, and/or submissions indicating why Eskom should or should not proceed to interrupt electricity supply to the points mentioned in the PAJA notice.
A final decision on whether Eskom will proceed with the interruption will be communicated after a review of the representations received through the PAJA process on 12 December 2024.
Eskom will keep the media and the public updated throughout the process as significant developments arise.
BizNews Reporter ___STEADY_PAYWALL___
In an unprecedented escalation, Eskom has issued a warning that it may disconnect the City of Johannesburg's electricity due to an unpaid debt that has now reached a staggering R5 billion. This drastic measure highlights the growing crisis in municipal governance, which has left many citizens and businesses in the economic hub vulnerable. Wayne Duvenage, CEO of the Organization Undoing Tax Abuse (OUTA), joined Alec Hogg on this morning's BizNews Briefing podcast to discuss the concerning implications of Eskom's stance and the deeper issues plaguing Johannesburg's administration.
According to Duvenage, the financial tension between Eskom and Johannesburg has been building for over a year. The city initially defaulted on its payments in October of the previous year, quickly amassing substantial debt. By early 2024, the amount had exceeded R1 billion, prompting Eskom to take the city to court. Although the city countered by claiming Eskom had overcharged them, the courts dismissed their claims, leaving Johannesburg to grapple with its growing debt. Now, the city's outstanding payments have soared to R5 billion.
"This is more than just a dispute over numbers; it's a sign of severe mismanagement," Duvenage stated, stressing that the funds collected from residents and businesses for electricity are being withheld from Eskom. The city's inability to pay its dues reflects what he describes as "a city in big trouble," where basic services are crumbling, and infrastructure is being neglected despite recent loans intended for improvements.
Eskom, which is also struggling under financial strain with outstanding debts owed by municipalities across the country, is likely viewing this latest move as necessary, albeit drastic. Duvenage argued that, like any creditor, Eskom cannot afford to let these debts spiral further out of control, especially when it is owed over R50 billion by municipalities nationwide. "Eskom has no choice but to take action, and they're at a point where drastic steps are needed to make sure Johannesburg's leaders understand the seriousness of the situation," he remarked.
If Eskom proceeds with the power cut, Johannesburg would face a complete loss of electricity, far more severe than load shedding. This could paralyze the city's economy, disrupt essential services, and leave millions of residents without access to power, underscoring the gravity of the city's financial mismanagement. Duvenage pointed out that the lack of consistent leadership has only exacerbated these issues, with mayors being frequently replaced and decisions on critical matters stalling as political considerations take precedence over practical governance.
The implications of Eskom's threat extend beyond immediate power concerns. Duvenage highlighted a deeper political crisis within the city and provincial structures. The relationship between the Gauteng provincial government and the City of Johannesburg has been strained, with provincial leaders reluctant to place the city under administration despite mounting issues. The ANC's national leadership is also reportedly dissatisfied with the provincial government's handling of Johannesburg's finances. However, tensions within the political landscape have so far prevented any decisive intervention.
Adding to the complexity is the position of Herman Mashaba, former chairman of the Free Market Foundation and a key figure in Johannesburg's political landscape, who has voiced support for a council that has overseen the city's escalating debt. Mashaba's stance, Duvenage argued, represents a troubling trend where political affiliations and power dynamics cloud the judgment of those in positions of authority, often at the expense of the city's long-term welfare.
With the next local elections still two years away, Duvenage emphasized that civil society cannot afford to wait. "The people of Johannesburg are losing patience," he noted, underscoring that many civil society organizations are considering coordinated legal action to hold the city accountable. OUTA, which has long been an advocate for government accountability, is contemplating measures that could involve petitioning courts to disband the city council over its consistent failure to meet its obligations and deliver essential services.
This crisis is a stark reminder of the urgent need for transparent and accountable leadership. As Duvenage concluded, "Civil society's frustration is reaching a tipping point, and we may need to take drastic steps to ensure the city's leadership serves its people, not their own interests."
Eskom's threat to Johannesburg could become a pivotal moment for the city, forcing its leaders to confront the consequences of long-standing mismanagement.
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