By: Charles Stride

After the last election I gave a talk titled “The unexploded, unemployment time bomb” and one of the many reasons therefor, is the continued escalation of Eskom tariff’s, set by a grossly incompetent National Electricity Regulator of South Africa (Nersa) that has had the impact of inhibiting value-added exports (where the employment opportunities lie) and destroying tens of thousands of jobs with little apparent concern to Nersa.

The regulator’s role is to ensure ‘fair pricing’ rather than ensuring that Eskom remained the lowest-cost producer, earning sufficient cash flows and not on it having to earn profits at the expense of SA as a whole.

Whilst the mismanagement, corruption and Treasury’s failure to control expenditure has also led, inter alia, to Eskom bearing the consequences as currently municipalities and metros not paying for the electricity supplied by Eskom resulting in an amount of R100,000,000,000 being owing to Eskom.

Eskom has to date been left with only two options, increase electricity rates and destroy employment and in international competitiveness of SA corporations (not apparently a concern) or borrow funds. Eskom has however done both at an annual interest cost of around R80,000,000,000 (my estimate as Eskom does not disclose its interest cost).

As borrowing capacity in SA is restricted it ultimately means that SA borrows abroad, incurring the additional and avoidable foreign currency risk.

Municipalities and metros have been able to use the gross electricity revenue (funds not being ring fenced), to fund bloated salary bills, corruption and wasteful expenditure without there being any direct impact on National Treasury, the waste simply being funded by debt to be paid in some date in the future. It should be obvious that the pooling of funds leads to a loss of accountability, which is rampant throughout SA and is something that National Treasury should have addressed decades ago.

In the meantime, Eskom bears the ever-increasing consequences by continually having to raise tariffs and unnecessary debt that should rightfully have been born by Treasury.

Having worked in the then Ministry of Finance 1995-1996, at a time when there was fairly strong control over state expenditure, I am of the opinion that Treasury’s role should primarily be that of expenditure control and the setting of the annual budget – after all revenue is collected by SARS, a separate entity.

I believe that a relatively easy fix is to ensure that Eskom’s customers no longer have the ability to continue to fund their nefarious activities and start repaying their debt by instituting the following:

1.Firstly, to enable Eskom to stop municipalities and metros from continuing to use electricity revenues Eskom should be entitled to insist that all municipalities and metros issue separate electricity accounts to customers, requiring customers to made payment directly into that entities dedicated electricity banking accounts.

2. Eskom should be authorised to insist that where prepaid electricity facilities are in place the agreements with those service providers require their payments to be made into the respective entity’s electricity banking account.

3. Eskom should be able to direct that funds deposited into the respective electricity accounts, should by agreement with the respective banks, be paid out weekly in the rough ratio of Eskom’s portion and the billing entity’s portion. This suggestion is purely a cash flow requirement and is independent of Eskom’s normal billing processes and preparation of monthly statements. Under or over recoveries could be settled on a six-monthly basis.

4. Eskom should also have the right to increase its percentage by such percentage as would be necessary to recover the unpaid debt of any debtor over a period of 3 to 5 years.

The consequence of the above would be that the debt due to Eskom no longer increases, future funding requirements would be reduced and a mechanism will be in place to claw back the arrears over time.

In addition, National Treasury would have to foot the cash flow consequences for future bloated employment costs, wasteful expenditure and corruption caused by municipalities and metros using funds rightfully due to Eskom, thus forcing National Treasury to perform what I believe is a responsibility that it has to date abrogated.

As Eskom is also owed large sums by government departments and State-Owned Entities (SOE’s), their unpaid monthly electricity charges, in excess of say 90 days, should also be for the account of National Treasury, thus forcing the cash flow accountability for their wasteful expenditure, where it, in my opinion, belongs.

What is, in my opinion, overlooked is that National Treasury has guaranteed the repayment of debt by SOEs, mainly Eskom to the extent of R500,000,000,000. To put this into perspective this amount would be the equivalent of 1.5 years of gross tax receipts from corporations in SA during the 2025/6 tax year.

Debt, and avoidable debt in particular, is a national disgrace. Currently our national budget has to cater for interest on debt resulting in taxpayers (or creditors) having to fork out over R350,000,000,000 per annum in interest alone, or nearly 20% of total revenue collected. This largely wasted expense is greater than the total tax collected from corporations during the 2025/6 tax year.

Hopefully, my easily implementable suggestion, can be implemented for the benefit of taxpayers, Eskom and the unemployed. If the State is unprepared to do so, is it not time that our financial institutions request foreign lenders (especially the World Bank) to make implementation a condition for future funding.