AfriForum has formally warned Eskom not to proceed with plans to suspend electricity supply to towns over unpaid municipal debt, arguing that the power utility’s latest notices are legally flawed and could lead to unlawful enforcement.
The civil rights organisation said in a statement it had sent a legal notice to Eskom after the utility earlier this week issued warnings to 14 municipalities, demanding that they settle their outstanding debts or accept one of three proposed arrangements.
Under Eskom’s notices, municipalities must either adopt a council resolution to enter into a distribution agency agreement (DAA) with Eskom – effectively allowing the utility to take over electricity distribution – convert their systems to a prepaid model, or allow residents to pay Eskom directly for electricity at Eskom tariffs.
AfriForum warned that the prepaid option could have severe consequences for communities.
“If municipalities switch to a prepaid system, it is highly likely that they will not be able to purchase sufficient electricity to power a town for a full month,” said Deidré Steffens, AfriForum’s advisor for local government affairs.
She added that vulnerable groups, including elderly residents and hospital patients, could be hardest hit if municipalities are unable to secure enough electricity.
“Water and sewage infrastructure could come to a standstill, which could cause a humanitarian and infrastructure disaster. In addition, residents who pay their bills faithfully are unfairly disadvantaged,” Steffens said.
AfriForum also argued that it would not be financially viable for municipalities to transfer electricity billing entirely to Eskom.
According to the organisation, electricity sales form a core component of municipal revenue, and losing that income could cause municipal financial structures to collapse within a short period.
AfriForum believes Eskom is aware that, in practice, municipalities are left with only one realistic option – signing a distribution agency agreement.
While such agreements could potentially offer a workable solution, AfriForum insists they must be concluded in strict accordance with the law. The organisation claims municipalities are currently being pressured to enter into these agreements without following the required legal processes.
Section 78 of the Municipal Systems Act requires municipalities to conduct a feasibility study and follow a proper public participation process before appointing an external service provider. AfriForum argues Eskom’s notices do not give municipalities enough time to comply with these requirements.
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“By confronting municipalities with unrealistic options without leaving room for legal processes, Eskom is putting them under unfair pressure and excluding communities from participating in decisions that affect them,” said Morné Mostert, AfriForum’s head of local government affairs.
He warned that the situation could ultimately strengthen Eskom’s monopoly in South Africa’s electricity market.
“The end result of this could be that Eskom, which is itself already exposed to financial management challenges, gains an even greater monopoly in South Africa and excludes other role players from the market,” Mostert said.
AfriForum also pointed to provisions in the Electricity Regulation Act which require the National Energy Regulator of South Africa (Nersa) to approve any changes to a licensee’s electricity distribution responsibilities.
The organisation has therefore written to Nersa requesting confirmation on whether the regulator has granted approval to any municipality to transfer its electricity distribution functions to Eskom through a DAA.
AfriForum has also asked the regulator to undertake to prevent Eskom and municipalities from entering into such agreements without complying with the legal requirements governing the appointment of external service providers.
“Nersa is supposed to play a central role in this scenario, but once again they are nowhere to be seen,” Mostert said.
“One of Nersa’s main focuses should be what licensees are doing with their responsibilities, including the distribution of power.”
AfriForum added that several other competent companies are capable of implementing distribution agency agreements, but argued that Eskom’s current approach limits fair competition and places municipalities and communities under pressure.
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