Treasury confirms support for distribution agency agreements as Eskom arrear debt rises
The National Treasury has confirmed that a scheme established to enable municipalities to write of arrear debt owing to Eskom by meeting various conditions, including keeping their current accounts up to date, is failing to arrest the crisis.
“While 24 municipalities have qualified for the first one-third write-off after 12 consecutive months of payments and 21 have generally maintained payments, as of 7 May 2025, 47 municipalities remain in default,” a section in the Medium-Term Budget Policy Statement confirms.
The underperformance is attributed to a combination of weak collections, excessive electricity and water losses owing primarily to a lack of maintenance, and inadequate credit control.
“Measures are being taken to assist municipalities in raising revenue, including expanding smart prepaid metering.”
The National Treasury said that municipal arrears to Eskom rose from R55.3-billion to R94.6-billion in the 12 months to March 31, 2025, despite the existence of the municipal debt-relief programme, which had been in place since March 2023.
At Eskom’s results presentation in September, CFO Calib Cassim reported that the figure had since climbed to above R103-billion and warned that municipal arrear debt owing to Eskom could exceed R300-billion by 2030, unless the trend was arrested.
The National Treasury confirms that Finance Minister Enoch Godongwana has endorsed so-called distribution agency agreements (DAAs) as an interim measure for defaulting municipalities.
Under the DAAs, Eskom will operate municipal electricity services for a defined period, support cost-reflective tariff setting and loss reduction, and assist with collections.
“The DAA pathway is intended to stabilise cash flows, improve payment discipline and create a bridge to longer-term structural reforms in the local government fiscal framework.
“The interim measure does not rule out stronger interventions where failures persist,” the National Treasury adds.
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