ESKOM raised grave concerns over the escalating municipal debt crisis during a briefing session with the Select Committee on Agriculture, Land Reform, and Mineral Resources.

Despite acknowledging progress in stabilising operations and reducing load shedding, the committee highlighted persistent challenges, including the crippling municipal debt that jeopardises the state-owned power utility’s financial sustainability.

Eskom reported that municipal arrears surged from R74 billion in March 2024 to R98.5bn by February 2025, with significant growth in debt attributable to provinces like Free State and Mpumalanga.

The power utility expressed serious concerns about the implications of this trend on its financial sustainability, noting that gains from the debt relief programme aimed at reducing its overall debt from R400bn to R250bn could be neutralised within three years if the rising municipal debt trajectory was not curtailed.

Municipal debt stands as a pressing issue in South Africa, with local governments facing significant financial distress that threatens the delivery of essential services. The debt owed by municipalities totals well over R100bn, with local governments owing substantial amounts to various entities, including water boards and Eskom.

Munsoft chief executive Nicholas Maweni said: “Such high levels of municipal debt mean that municipalities may be at risk of being unable to provide basic services, maintain infrastructure or upgrade facilities. Similarly, they may also not have enough cash to fulfil their responsibilities.” This dire situation underscores the urgent need for comprehensive interventions to address the escalating municipal debt crisis.

National Treasury underscored its efforts to enforce fiscal discipline through several interventions, including withholding equitable share allocations to defaulting municipalities under Section 216(2) of the Constitution.

However, entrenched dysfunctionality in many municipalities continues to undermine progress. Only a fraction of the 10 million indigent households identified in the census are benefitting from the Free Basic Electricity (FBE) grant due to inefficiencies in municipal administration, leaving millions of impoverished South Africans without critical energy support.

The Department of Cooperative Governance and Traditional Affairs (Cogta) and the South African Local Government Association (Salga) shared insights into the structural and operational inefficiencies crippling municipalities. These include weak governance, lack of capacity, inadequate enforcement of revenue collection measures, and outdated infrastructure.

Cogta noted that the absence of energy master plans and failure to maintain accurate indigent registers has compounded the crisis. Meanwhile, Salga highlighted that the overly fragmented approach to addressing municipal debt must be replaced with integrated capacity-building programmes, including technical assistance for cost-reflective tariffs and improved revenue collection systems.

During discussions, more than 160 municipalities were classified as financially distressed, with 98 operating on unfunded budgets in the 2024/2025 financial year. Seven municipalities are participating in the Municipal Debt Relief Program, and 14 have successfully met the conditions required for debt relief and write-offs.

The committee stressed that the municipal electricity debt crisis requires collaboration and decisive action from all levels of government and stakeholders, posing a significant risk to service delivery and the livelihoods of millions of South Africans.

Smart metering solutions have shown promising results in improving revenue collection, with pilot projects recovering millions of rand in previously uncollected funds. The National Treasury announced that an additional R650m would be allocated in the next financial year to expand smart metering programs to targeted municipalities.

These interventions aim to enhance overall efficiency and ensure the timely payment of bulk electricity accounts.

The meeting further explored the critical role of legislative reform in tackling these issues. Eskom and other stakeholders called for adjustments to the Electricity Regulation Act to enable more proactive credit control measures. The committee also noted concerns about the affordability of electricity tariffs and the long-standing need to increase the FBE grant threshold to meet the growing needs of indigent households.

Members of the committee pointed out that sustainability solutions should balance immediate interventions with long-term reforms. The committee recommended the establishment of a dedicated Municipal Recovery Task Team comprising Eskom, National Treasury, Cogta, Salga, and other relevant stakeholders.

This task team will focus on implementing and monitoring solutions, including measures to improve governance, enhance collections, introduce prepaid systems for bulk electricity, and address legislative barriers.

The committee commended Eskom, National Treasury, Cogta, and Salga for their continued commitment to resolving this crisis. However, it emphasised that municipalities must take greater responsibility for reversing the current trajectory.

Deputy Minister for the Department of Electricity and Energy, Samantha Jane Graham-Mare, informed the committee of plans to establish a joint task team involving the National Treasury and Cogta to develop customised interventions to address the municipal debt crisis.

As the situation remains dire, the call for collaborative solutions and long-term reforms grows louder. The time for pointing fingers is over; now is the time for collaborative solutions and systemic change. Without decisive action and a concerted effort from all stakeholders, the municipal debt crisis will continue to undermine the financial stability of South Africa’s municipalities and jeopardize the delivery of essential services to millions of citizens.

financial distress

Eskom warns of severe implications from rising municipal debt