Makhanda’s lights to stay on – for now
The lights in Makhanda will stay on for now after Eskom and Makhanda residents and businesses put together a high court-sanctioned plan to force Makana municipality to pay its massive and overdue debt to the power utility.
Eskom warned in court papers that if it cannot collect revenue from delinquent municipalities like Makana, it faced a real prospect of “economic implosion or collapse and a complete national blackout”.
The Grahamstown Residents’ Association (GRA), Grahamstown Business Forum (GBF) and individual businesses resorted to court for an urgent interdict to stop Eskom from implementing its threat to switch off the bulk electricity supply to Makana municipality which owes it more than R80m.
Eskom announced it intended interrupting supply to the city from next week for up to 14 hours a day after the municipality reneged for the fourth time on its repayment plan with Eskom.
But on Thursday, instead of slogging it out in court, lawyers for the residents and businesses and the lawyers for Eskom put their heads together and formulated a settlement plan which will force the municipality to ring-fence all electricity income from residents and from the electricity portion of its equitable share and hand it over to Eskom.
The municipality has reneged on its own council resolution from more than a year ago in terms of which it was meant to do this.
Instead, despite having excellent collection rates of between 80% and 97% for electricity, it has failed to pass the collected revenue on to Eskom.
The municipality was cited as a respondent in court papers in the Eskom interdict matter but did not show up at court.
In the end, this turned out badly for the municipality which was unrepresented in a settlement which will see its senior officials having to meet the municipality’s payment obligations to Eskom or face the possibility of being jailed for contempt of court.
Even worse for the municipality was that judge Zamani Nhlangulela ordered it to foot what will prove a very large legal bill which included multiple attorney firms and four legal counsel.
The GRA, GBF and businesses say the effect an electricity blackout would have had on the city – which is home to a large private/ public hospital, Rhodes University and dozens of government and elite private schools – would be disastrous.
The city is already floundering under a broke municipality where municipal staff have been on a nine-week long informal strike.
In its court papers, Eskom provided startling facts.
Its senior manager for the Eastern Cape Zuhdi Hamza revealed that municipal debt to the entity was crippling Eskom which now faced the real prospect of “economic implosion and a complete national blackout”.
“Such an eventuality is not in the national interest. Ultimately, were Eskom to collapse under the weight of the huge debt owed to it by customers such as [Makana] municipality, the entire South African economy will similarly be adversely affected.”
He said before Eskom took a hard line with defaulting municipalities municipal debt to Eskom had grown by 70% from R6bn in March 2016 to R10.2bn in November 2016, just eight months later. By 2019, Eskom was owed a staggering R20bn by municipalities, forcing Eskom to borrow money at a huge cost to fund capital projects.
In terms of the order negotiated between lawyers for Eskom and GRA and GBF, the matter was postponed to June.
In the interim, the lights will stay on and National Treasury and the Cogta national and provincial department will be joined in the application in a bid to find an intergovernmental solution to the payment impasse...
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