Roundup: S. African court allows electricity termination to defaulting municipalities

South Africa's North Gauteng High Court on Thursday dismissed lobby group AfriForum's application to stop electricity utility Eskom's plan to terminate electricity supply to defaulting municipalities.

In the ruling, Judge Hans Fabricius emphasized that it is necessary to appreciate the context in which Eskom operates in the national economy, seen against the background of its constitutional rights and obligations.

The court also emphasized that the duties of municipalities to honour their obligations to Eskom are important in the present context.

The judge also acknowledged that Eskom had consulted all the municipalities and relevant stakeholders extensively since 2011.

AfriForum had sought to interdict Eskom's planned reduction of the supply of electricity to the defaulting municipalities. Arrears are located in municipalities in mainly the Free State, North West, Mpumalanga and Northern Cape Provinces.

Eskom said on Wednesday that it would delay turning the lights off in the affected areas from Thursday until Tuesday next week.

The amount owed has risen to 10.2 billion rand (about 739 million US dollars), which grew over the past eight months from six billion rand (about 435 million U.S. dollars). In the last five years, the overdue debt has increased tenfold with the March 2017 forecast being in excess of 12 billion rand (about 869 million dollars).

Matshela Koko, Eskom's Interim Chief Executive, welcomed the court ruling, saying that though appropriate legislation allows Eskom to completely terminate supply to the defaulting municipalities, "as responsible leadership, we opted for a less invasive approach of scheduled interruptions for certain hours of the day."

The Electricity Supply Agreement, the Eskom Distribution Licence Conditions and the Electricity Regulation Act empower Eskom to disconnect the customers for non-payment after having given the customer 14 days written notice.

It is imperative for Eskom to collect its revenues or else the entity will not be sustainable. For instance, Koko explained, municipalities contribute almost 42 percent of Eskom's total sales and almost 41 percent of Eskom's revenue annually, so non-payment of accounts has a significant impact on Eskom's cashflow.

"Failure to act renders Eskom in breach of the Public Finance Management Act and its licence conditions, as Eskom is obliged to collect all revenue due and enforce the conditions of the electricity supply agreement with municipalities," Koko said.

The massive non-payment of electricity accounts by a number of municipalities highlights the growing dysfunctioning of local governments in the country. Endit