Joburg to take over Soweto power supply, R7 billion Eskom customer debt

The City of Joburg has signed a memorandum of understanding (MOU) with Eskom to take over its consumer base in the metro, which will include absorbing billions in customer debt.

This was announced on Friday morning by the newly elected Mayor of Johannesburg Mpho Moerane, who takes over the reigns in the city for at least for the next 30 days before the local government election.

The deal is expected to cost the city at least R7 billion unless it can negotiate a partial debt write-off, which may also be on the cards, according to finance MMC Matshidiso Mfikoe.

The officials were speaking to media after Moerane was elected into office. The mayor says he will hit the ground running and focus on this issue over the next 30 days, ahead of the election.

“The issue that we will be dealing with in particular is the electricity crisis in Soweto, Orange Farm, Ivory Park, Diepsloot and Sandton. As I speak, I am told by the officials that the memorandum of understanding is ready. That is going to be signed between us as the city, City Power, and Eskom to take over the supply of electricity in these areas. So it will happen immediately so that the MOU will guide us, in terms of making sure that the transfer is smooth,” says Moerane.

Eskom negotiations

Mfikoe has been a direct participant in negotiations between Eskom and the City, which will hand over the responsibility to supply power to thousands of Eskom’s customers in townships and suburbs around Johannesburg.

As part of the memorandum, City Power will take on Eskom’s customer debt in a deal that might culminate in a partial write-off of nearly R7 billion owed by Johannesburg consumers.

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Mfikoe says negotiations have been going well with Eskom and the city is preparing for a public consultation process to find a solution to the debt crisis that residents will agree to.

” We want to indeed implore our communities to pay for services that they consume as we resolve their problems. So it has been a long time coming with Eskom… we would have loved that by the close of term we will have agreed and taken over,” says Mfikoe adding that the takeover is ‘not imminent, it is happening’.

Dozens of service delivery protests have arisen from Eskom routinely cutting power in areas where consumers are notoriously failing to pay their debt to Eskom, and where illegal connections are rampant. Moerane says the ANC will also try to engage with communities about service delivery issues including power supply.

Partial debt write-off needed from Eskom

The city does not have the R7 billion needed to clear the debt owed by Eskom’s Johannesburg customers, primarily in Soweto. Moerane says the MOU will guide the city in determining the true value of the debt.

Local government is also expected to reach out to the National Treasury and the Department of Cooperative Governance and Traditional Affairs for the money to fund this endeavour

Despite not having the money, the mayor wants the transfer to go through as soon as possible.

“There is also an amount of R4 billion for the network… Infrastructure that is made by Eskom that will get into our books but we will also settle it. For the debt we will engage national government on how we will solve it.”

Mfikoe adds the city plans to implore residents to allow officials to engage communities during the public consultation leg of the takeover process.

“Its also important for us to engage our communities, because they consume the service so responding and resolving the debt is something we need to engage with them. Eskom says we owe them about R6 to R7billion so there would be possible negotiation of a partial write-off of that amount.”

The city hopes to finalise the agreement before the local government election next month, to allow the new administration to begin with it immediately.

The takeover process will also include taking over Eskom’s grid infrastructure in the metro, as well as planned upgrades and the building of new infrastructure.

Under this new plan, the city is expected to modernise its infrastructure including a new meter system to help with the current billing crisis.

Moerane says the 30 days remaining until the 1st of November is critical in making sure residents don’t suffer because the city has lost another mayor.

He was elected in a special council meeting on Friday morning following the death of Mayor Jolidee Matongo, who died in a car accident while campaigning in Soweto.

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Moerane is the regional treasurer of the ANC for the Greater Johannesburg region and thus, he points out, will be a key component in the party’s election campaign.

Will it work?

With City Power already grappling with billions in infrastructure damage from cable theft and illegal connections, industry analyst Professor Samson Mamphweli suggests this mammoth task may prove too big for the utility’s already stretched resources.

“This could be a good idea only if City Power has means of collecting payments from the community. The biggest challenge is revenue collection, followed by illegal connections that draw a lot of electricity from the grid without any payment.”

Opposition parties support the idea of transferring Eskom’s grid in Johannesburg to City Power, but question the capacity for City Power to add thousands of new customers to serve who are desperate for proper service delivery.

Democratic Alliance (DA) councillor and mayoral candidate for Johannesburg Mpho Phalatse argues that national government must provide the funds for this transfer.

“The people of Soweto have suffered so long under Eskom with constant outages, which is why the DA has always supported the proposal that City Power takes over Eskom supplied areas such as Soweto and Sandton, so that the payments collected from the latter can help cross subsidise the former, keep City Power afloat, and help keep the lights on,” says Phalatse.

“However, without support of national government to deal with Soweto’s debt, City Power will be crippled. It would be unfair on the rate payers of Johannesburg to inherit the total liability of Eskom’s debt.”

simnikiweh@citizen.co.za