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 the Makana municipality to pay its massive and overdue debt to the power utility.
Eskom warned in court papers that if it could not collect revenue from delinquent municipalities like Makana, it faced a real prospect of “economic implosion and a complete national blackout”.
The Grahamstown Residents’ Association, Grahamstown Business Forum 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 the power utility.
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 the legal bill, which included multiple attorney firms and four legal counsel.
The residents’ association, business forum and individual businesses say the effect an electricity blackout would have on the city – which is home to a large 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 informal strike and the road, water and sewage infrastructure have all but collapsed.
In its court papers, Eskom’s 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”.
He said before Eskom took a hard line with defaulting municipalities, municipal debt to the utility had grown by 70%, from R6bn in March 2016 to R10.2bn in November 2016.
By 2019, Eskom was owed R20bn by municipalities.
In terms of the order negotiated between the Eskom, residents’ association and business forum lawyers, the matter was postponed to June.
In the interim, the lights will stay on and the National Treasury and the national and provincial co-operative governance departments will be joined in the application in a bid to find an intergovernmental solution to the payment impasse.
If this works, it could develop a template for Eskom to recover funds from other municipalities.