The Sunday Mail
SOUTH Africa’s power utility plans to cut supply to 20 municipalities that are home to about 3,8 million people due to non-payment by local governments, even as citizens living in those areas settle their bills.
Eskom Holdings SOC Ltd. may interrupt power provision during peak times for as many as eight hours daily during the week, and six hours each day on weekends starting June 5, the Johannesburg-based company said in an e-mailed statement on Friday.
That is during the depths of the country’s winter.
The districts owe Eskom R3,68 billion ($306 million), it said.
“A lot of people will sit without power even after they’ve paid their bills,” said Francois Botha, a councillor from the opposition Democratic Alliance party in Matjhabeng municipality in the Free State province, which has about 400 000 residents and is one of those that may be affected.
The area has discussed a payment plan with Eskom, he said.
The utility is struggling to plug a 225 billion-rand funding gap required to build new plants and maintain existing ones.
Eskom is rationing supply because it can’t meet demand following years of underinvestment, forcing businesses to shut doors at peak times.
Can’t Discriminate
The company will cut off supply to municipalities directly and can’t discriminate between paying and non-paying customers, an Eskom spokeswoman, who asked not to be identified in line with company policy, said by phone.
The company provides power to municipalities that then distribute it and charge residents. The nation has a population of about 54 million people.
“Non-payment for electricity undermines Eskom’s statutory obligation to generate and supply electricity to municipalities nationally on a financially sustainable basis,” Zethembe Khoza, Eskom’s interim chief executive officer, said in the statement.
Cutting power is a “last resort,” Eskom said.
Consumers will be given “adequate notice” of disconnection and “will be given the opportunity to make written representations to Eskom,” the utility said. Other towns and cities affected include Witbank to the east of Johannesburg, Secunda to the south and Klerksdorp and Randfontein, which lie west of the economic hub.
Smaller Users
Industrial users such as Anglo American Plc and ArcelorMittal South Africa Ltd. won’t be affected by the cut-off because most of them receive their power directly from Eskom, not via local municipalities, said Shaun Nel, a spokesman for the Energy Intensive Users Group of South Africa, which speaks for 31 of the country’s largest electricity users.
Many food and animal-feed producers have plants in smaller towns and receive power supplies from their municipalities.
They won’t be able to operate if provision gets interrupted daily, said Coenraad Bezuidenhout, the executive director of the Manufacturing Circle that speaks for companies including McCain Foods Ltd.’s local unit.
“This will create uncertainty because factory owners and their customers do not know whether they’ll be able to produce; they’ll choose to import,” he said by phone.
“Eskom is now forced to crack the whip against municipalities where it should be the responsibility of government.”
Withholding Funds
The National Treasury is withholding fund transfers to 60 municipalities because they failed to honour financial commitments, it said on March 31. This includes owing Eskom a total of R9 billion, half of which is current, and having to pay water boards R3,6 billion, it said.
The Treasury is currently reviewing an application by the power company to increase its prices by 25 percent. Annual inflation was 3.9 percent in February.
The total municipal arrears greater than 30 days at March 31 was R4,6 billion, Eskom said.
Westonaria, a municipality west of Johannesburg with about 112,000 residents that owes Eskom about R58 million, this week signed an agreement on how it will settle the debt by April 2016, Municipal Manager Thabo Ndlovu said.
“We sent it to Eskom so it can also sign,” he said by phone.
“Looking at our projection of revenue, we feel we will be able to settle.” High unemployment in the area has curbed revenue collection, he said.
Eskom says they are going to switch off electricity, but they can’t do that “without due process.’’
At least seven of the affected municipalities are in the central Free State province, where farmers use irrigation systems to water about 73 percent of the wheat crop that’s grown in winter, said Wandile Sihlobo, an economist at Grain SA, a farmers’ lobby group. Planting will be affected as farmers get supplied by municipalities, he said by phone.
Alex van den Heever, who owns EMC Panelbeaters in Springbok in the Northern Cape province’s Nama Khoi municipality that may be cut come June 5, said more frequent power cuts will be unaffordable.
“I have a generator that I put up the first time load-shedding was implemented,” he said by phone, using the local term for rotational blackouts. The unit consumes 10 litres of diesel hourly.
“It will cost R140 an hour to run the generator, so it will have a major impact on us.” – Bloomberg.
