Tshwane strikes deal to settle R6.6 billion Eskom debt! The City of Tshwane has announced a significant financial breakthrough in its ongoing efforts to stabilize its finances.
Mayor Nasiphi Moya revealed that the municipality has entered into a formal agreement with Eskom to settle a historical debt of R6.67 billion owed to the national electricity utility. The deal, described as a “landmark agreement,” is a key step in the city’s journey toward financial recovery and stability.
Details of the Agreement
During a public statement, Mayor Moya shared the specifics of the settlement, which was formalized as a court order on November 26, 2024. The repayment plan spans five years, with the first installment of R400 million due in December 2024.
Tshwane strikes deal
Additionally, the city has already made a payment of R425 million in arrears for October 2024. A crucial element of the deal is the commitment to pay all current Eskom accounts within 30 days of billing, a measure intended to prevent the accrual of further debt.
“This agreement is a significant milestone in our journey to financial recovery and stability,” said Moya. “It allows us to redirect our focus toward improving service delivery and enhancing revenue collection systems.”
Ending Costly Litigation
The agreement also marks an end to years of costly legal disputes between the City of Tshwane and Eskom. Moya emphasized that stronger financial governance practices would be implemented to ensure the municipality does not fall into a similar predicament in the future.
“We are committed to adopting stringent financial management practices to prevent a recurrence of such debt,” Moya said.
Challenges Ahead
Despite the optimistic tone of the announcement, economists and political leaders have raised concerns about the city’s ability to meet the stringent terms of the repayment plan. Economist Dawie Roodt noted that the city’s cash flow challenges, which led to the debt accumulation in the first place, remain a critical concern.
“The question is whether Tshwane’s cash flow will be able to keep it up because that’s why they are in trouble in the first place,” said Roodt. He warned that the repayment agreement could limit the city’s budget for other essential services until the debt is fully settled.
Strict Financial Discipline Required
Cilliers Brink, DA Tshwane caucus leader, welcomed the agreement but acknowledged that it comes with significant responsibilities.
He highlighted the conditional nature of the settlement, particularly the stipulation that interest on the arrears will only be waived if the city adheres strictly to the payment schedule.
“If one Eskom payment is missed, it might mean that the deal is lost and that all arrears become due and payable immediately,” Brink cautioned.
He further emphasized the need for “iron-like financial discipline” and pointed out that the city must continue initiatives like the Tshwane ya Tima campaign, which was launched by the previous municipal government to improve billing and revenue collection.
Tough Decisions Ahead for Tshwane
The Tshwane ya Tima campaign has been instrumental in addressing non-payment by residents and businesses, ensuring better revenue collection for the municipality. Brink acknowledged that while it is an unpopular measure, it is necessary to keep the city on track financially.
“Like forgoing salary increases, Tshwane ya Tima is another difficult but necessary undertaking to get Tshwane out of trouble,” he said.
The city’s financial challenges extend beyond the Eskom debt. Brink pointed to ongoing labor disputes as another critical area requiring fiscal prudence. The ANC-led coalition government in Tshwane is continuing its legal battle in the Labour Court to avoid paying salary increases to municipal workers, arguing that such raises would jeopardize the city’s financial recovery efforts.
Balancing Recovery with Service Delivery
The agreement with Eskom represents a critical opportunity for Tshwane to rebuild its financial health, but it also underscores the difficult trade-offs the city must navigate. With reduced flexibility in its budget until the debt is repaid, the municipality faces the challenge of balancing repayment obligations with the need to maintain and improve service delivery.
For Mayor Moya and her administration, the focus now is on ensuring compliance with the agreement while implementing measures to prevent similar financial crises in the future. As Tshwane embarks on this journey of recovery, its ability to execute this ambitious plan will be closely watched by residents, stakeholders, and the broader public.