Eskom municipal debt poses risk to all creditors – Treasury
National Treasury says the municipal debt owed to the embattled power utility Eskom poses a risk to the utility and all its creditors.
Treasury shared these remarks during a media workshop on the Municipal Debt Relief Circular on Wednesday.
Municipal debt owed to the state-owned entity currently stands at R57 billion.
It is anticipated that most municipal debt will be written off by the government in an effort to free up some revenue in qualifying municipalities owing Eskom, to maintain their current bulk accounts, and other creditors to provide a reliable basic level of services.
Treasury’s Sadesh Ramjathan says if municipalities fail to compile with the relevant conditions it will result in immediate Eskom credit control and debt management.
“National Treasury could immediately invoke section 216 of the Constitution and or any other remedies (including instituting individual financial misconduct and/ or criminal proceedings).
“Immediate Eskom credit control and debt management - municipality to again start repaying arrears, interest and penalties. Eskom to resume legal proceedings, including attaching the municipal bank account.
“The normal penalties applicable to the wider local government will also apply.”
Ramjathan explained that only municipalities which comply with certain conditions for 12 consecutive months, will see one-third of the debt written off.
“Once the debt is written-off it remains written, once Eskom has applied the annual third debt write-off to the municipality’s arrear debt owed to Eskom such arrear debt remains fully settled to Eskom irrespective of the municipality’s subsequent non-compliance with the conditions.
“Every municipality with arrear Eskom debt will be targeted subject to the municipality making a written application to the National Treasury to benefit from this relief package – the National Treasury will consider each application on merit.”
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