Power utility Eskom has threatened to disconnect the electricity supply to Makana Municipality should the latter fail to stick to its existing payment plan; however, the municipality has devised a new plan to pay the Eskom debt to the tune of R58 million.
Power utility Eskom has threatened to disconnect the electricity supply to Makana Municipality should the latter fail to stick to its existing payment plan; however, the municipality has devised a new plan to pay the Eskom debt to the tune of R58 million.
A letter from Eskom dated 10 November from the Strategic Account Executive within the Eastern Cape Operating Unit, Tom Chapman, states that should the municipality fail to pay the full amount of more than R58m including VAT and interest within a period of 14 calendar days from the date of receipt of the letter, Eskom might discontinue the supply of electricity and terminate the agreement.
This prompted the municipality to call an 11th-hour special council meeting.
It was stated in that meeting yesterday that the embattled municipality might face a complete power shut-down if it failed to make a payment of more than R58m. This is despite the fact that in July this year, the municipality paid over 90 percent of its equitable share, amounting to R30m to Eskom, supposedly reducing the total debt to R18m.
However, during August the municipality received a new invoice from Eskom with adjustments, with the utility claiming it had been under-billing Makana.
According to an item discussed in the meeting yesterday, the municipality has defaulted on an what officials termed an unrealistic Eskom payment plan. This was the result of being required to provide a payment plan for the sake of compliance with external demands.
Makana currently owes Eskom R58 053 726.78 including VAT and accumulated interest, compounded monthly from January 2015 to 3 November 2016, for electricity supplied to the municipality.
The municipality has, however, crafted a new “realistic” payment plan which could see it paying off all its Eskom debt over a period of four years. The plan was submitted to Eskom on 23 November.
According to the item discussed in the meeting, the proposed payment plan indicates that unless the situation improves, the municipality will only be able to settle the arrears by December 2020.
This reflects the reality that the municipality is facing, according to the item.
The payment plan submitted by the municipality is divided into six instalments starting from this month until the final payment in December 2020.
The payments are broken down as follows: R4m this month; R10m in August next year; R15m in August 2018; R15m in August 2019; R11m in August 2020 and a final amount of R3m in December 2020.
In the acknowledgement of debt and repayment plan agreement, Makana concedes that Eskom may with due regard to all relevant legislation and the provisions of the Electricity Supply Agreement, take whatever legal remedies available to it, including disconnection of the supply of electricity to the municipality.
In the document, the municipality admits that efforts to reduce expenditure, although positive in many instances, have not effected the desired results. Fuel usage was reduced from R800 000 per month to around R45 000 and the municipality’s telephone bill was reduced from R220 000 to about R130 000 monthly, according to the document.
Responding to questions from Grocott’s Mail about the matter, DA caucus leader Mlindi Nhanha confirmed that the issue was discussed in yesterday’s special council meeting.
Nhanha said Eskom had threatened to disconnect the city if an arrears balance of R58 million was not paid in 14 days.
Yesterday Nhanha told Grocott’s Mail that in the meeting he had raised some discomfort about numbers that were not adding up.
“The municipality at some point paid Eskom R30 million (90% of the equitable share) to reduce the debt to R18 million, Eskom turned around to say no we were under-billing and an additional R14 million and an interest of R17 million were included. Basically taking us back to the red zone where Eskom wants us,” he said.
A disappointed Nhanha claimed that no one had bothered to double check whether indeed the municipality was under billed in the first place.
Nhanha said their view as the DA is that the municipality is in a very precarious situation.
“So much is at stake should Eskom pull the plug. The city’s economy will be severely affected. Rhodes University, all the schools around Grahamstown and businesses will be the biggest losers,” he said.
The DA leader also questioned the timing of the situation.
“We find it very interesting that Eskom agreed to entertain a payment proposal from the municipality, and afterwards they changed their attitude after having learnt about an equitable share amount of R25.7 million to be paid today to the municipality, of which they demand a very significant portion,” he said.
Nhanha said that to the DA, this kind of practice resembled a loan shark. He said Eskom’s attitude is to “suck as much money out your client” regardless of your client’s financial position, as long as you are getting your money back.
“This is very irresponsible on the part of Eskom. They are very much hard at work in raising the R1 trillion required by their masters and friends for the nuclear project.
“We believe the municipality has tabled a realistic and affordable payment plan, but Eskom is digging its heels, hell bent on sucking the last drop of blood,” he said.
Attempts to reach Makana Municipality for comment were unsuccessful at the time of going to press.
anele@grocotts.co.za
