Sol Plaatje’s failure to adequately comply with Eskom’s Municipal Debt Relief Programme is placing the future of the municipality in jeopardy. This information recently came to light during the tabling of the 4th quarter SDBIP report.
The municipality finds itself in breach of the agreement for only paying partial amounts for July and August. To try and salvage its agreement with Eskom, the municipality must now urgently make payment of R134,337 million. Failure to do so could have very serious repercussions for the municipality.
According to the agreement, if a municipality fails to comply during the duration of the Municipal Debt Relief programme, the benefits of the relief will immediately cease and the municipality must immediately start repaying its Eskom arrears, interest and penalties. Eskom may also resume any legal proceedings against a municipality, including attaching the municipal bank account.
National Treasury may also add additional penalties, including instituting criminal proceedings and initiating a takeover of a defaulting municipality’s electricity business. This would nullify revenue collection generated by electricity sales, plunging the already impoverished municipality into an even worse financial crisis. At present, the municipality must draw on investments and redirect grant funding to pay salaries, institute a soft lock on the filling of vacancies, and remove employees’ option to sell leave. Furthermore, the municipality must redirect grant funding between various projects to make up for a lack of own capital to invest.
As of 30 September, Sol Plaatje owed Eskom R1,069 billion for bulk electricity. This amount represents a fifth of the total R5.169 billion owed by Northern Cape municipalities as at June 2024.
Given Sol Plaatje’s increasing inability to operate as a going concern, as recently stated by the Auditor General, the DA was vocal in opposition towards the debt relief agreements as being unrealistic for Sol Plaatje. The municipality was afforded two opportunities to pull back from the agreement but unrealistic optimism overpowered the black and white details of the municipality’s dire financial circumstances.
However, given that Sol Plaatje is now bound to the programme, the DA will do everything in our power to hold them accountable for complying. We already succeeded in getting a recommendation passed to ensure that all future SDBIP reports are presented to committees before being tabled in council. With quicker access to information and a chance to interrogate the reports, we will be able to respond more effectively to risks, such as defaulting on the payment agreement.
The DA has also tabled a motion in council to rectify the composition of committees, thereby ensuring a more effective and accountable next step in the governance process.