Eskom unpacks improved performance but facing burden of R90 billion municipal debt

While Eskom said it was turning the corner in terms of its operational and financial performance, R90 billion in municipal debt was among the crippling factors hindering its performance.

The Eskom board and executives yesterday presented the 2024/2025 performance report to the Portfolio Committee on Electricity and Energy in Parliament. The R90bn debt was increasing by about R1.5bn a month, MPs heard.

Eskom reported limited success with the Municipal Debt Relief programme, as low adherence to its conditions has caused municipal debt, including that of metros, to grow by more than R10bn per year.

In response to the presentation, former Eskom CEO and MK Party MP, Brian Molefe said the power utility should put the whole country on prepaid electricity to avoid increasing municipal debt. He said Eskom would actually be able to borrow from its consumers as they pay in advance rather than being in arrears.

“What will it take to put the whole of South Africa on prepaid because in that way, a municipality has to prepay for electricity. There won’t be an issue of 30 days debt, which goes to three years to five years and so on,” Molefe said.

“A long time ago there was an SMS (Soweto, Midrand and Sandton) project of starting there to make them prepaid. I think it was distribution division at the time. What will it take? Is it something that you are entertaining to get the whole country to pay electricity prepaid?”

Eskom said over and above the National Treasury R450bn debt-relief guarantee and efficiency measures, it was implementing municipal debt recovery and ensuring an appropriate tariff, which is critical to financial sustainability.

Eskom reported that in the current year, it had incurred non-technical losses from theft, incorrect billing and illegal connections that make up more than 70% of all energy losses recorded.

The utility said its Energy Availability Factor (EAF) had improved 8.41 percentage points, it had achieved a R16.33bn reduction in diesel spend compared to the same period in the previous financial year, and reported a consistent decline in unplanned load losses on the back of disciplined execution of maintenance. Load shedding has also been suspended for over eight months since March 26.

Eskom’s CEO, Dan Marokane, said the four pillars of financial recovery hinge on revenue security, debt reduction, cost containment, and reduction in municipal non-payment.

“We have implemented cost efficiencies in our cost base, achieving on average R20bn cost reduction for the last three financial years,” Marokane said.

“To date, operational performance has led to reduced diesel expenditure by R16.33bn. The debt-relief allowed the business to manage its high debt service costs and cash, to allocate the financial resources needed for generation to address the maintenance backlog and adequately prepare for outages.”

Eskom reported higher coal costs compared to the same period last year, from R45.3bn to R49.64bn by September this year – a R4.3bn increase.

It said it anticipated 2 524 MW to be brought online by the end of 2025 through the return of Medupi Unit 4 from long-term outage, ensuring successful implementation of Koeberg Unit 2 steam generator and the synchronisation of Kusile unit 6. It said 3 470 MW grid capacity could be made available through implementing curtailment in the Eastern and Western Cape, and had also commissioned

20 MW of battery energy storage (Bess) in Worcester.

“Our pipeline of new clean energy and revised approach to the Just Energy Transition is intended to mitigate the socio-economic impact of the transition; leadership stability and the improved staff morale has been fundamental to the turnaround,” Marokane said.

He said there had been a downward trend in unplanned losses, specifically driven by priority eight stations: Tutuka, Majuba, Kusile, Kendal, Matla, Duvha, Arnot and Kriel.

Professor Bonke Dumisa, an independent economic analyst, said credit must go to the leadership of Eskom for the upturn in its operational performance. “It bodes well for the economy that Eskom has been able to achieve eight load shedding-free months without resorting to burning excessive diesel.”

Ruse Moleshe, managing director of RUBK, an energy and infrastructure consulting and advisory company, said it seemed that Eskom was on a positive path.

Moleshe added that Eskom is now tackling collection in the distribution industry, not only from redistributors (municipalities) who are in arrears, but also bulk theft from organised criminals, such as the farm that was recently caught connecting informal users and charging them, contributing to a financial loss of almost R7 million.

Waldo Krugell, an economics professor at North-West University, said: “Things are looking up at Eskom. However, their challenges are not over; they have outstanding debts that municipalities still owe and they still have a huge debt burden which they have to pay interest on.

“This eats up the additional money and it’s the reason they ask for these significant tariff increases so that they are able to run electricity generation from current income and use money to pay interest on debt.”

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