South Africa’s National Treasury has advised 15 struggling municipalities to appoint Eskom as their agent to handle electricity distribution on their behalf. This intervention follows the municipalities’ non-compliance with the conditions of the National Treasury’s municipal debt relief program, aimed at addressing escalating debts owed to Eskom.
Energy analyst Professor Sampson Mamphweli provided insights into the challenges facing South Africa’s electricity distribution landscape, particularly the financial and infrastructure pressures on municipalities. He highlighted three main issues: dilapidated municipal infrastructure that is not properly maintained, inability to collect revenue from customers—with customers owing municipalities around R400 billion—and instances where collected revenue is redirected to other services before paying Eskom.
The Treasury’s advice to enter into distribution agency agreements seeks primarily to resolve the growing municipal debt to Eskom. Under the debt relief program, qualifying municipalities must pay for current electricity accounts, with the Treasury clearing historic debts. However, many continue to struggle with revenue collection and payments, prompting this recommendation. Professor Mamphweli noted that Eskom is better positioned for revenue collection, having successfully implemented measures such as smart meters upgraded to the latest standard (Key Revision Number Two), which has converted many non-paying customers into payers.
In practical terms, these agreements would see Eskom take over maintenance of distribution networks, substations, and infrastructure, while installing smart meters at a faster pace. Finance Minister Enoch Godongwana has made available around R2.5 billion for smart meter installations in some municipalities. Eskom would collect revenue, deduct a management fee, and remit the balance to the municipalities. Municipalities would continue procuring electricity from Eskom, but Eskom would manage infrastructure and collections.
Some stakeholders, including SALGA, have raised concerns that this could represent a backdoor takeover of municipal electricity distribution. Professor Mamphweli views it as a necessary stabilization measure rather than a permanent solution, part of broader government efforts. These include the Minister of Electricity and Energy piloting renewable technologies like solar PV and wind on municipal land to provide cheaper electricity, generate revenue, and help pay Eskom while saving costs. He described it as a temporary but essential step given municipalities’ severe struggles.
The professor linked poor maintenance to ongoing load reduction—distinct from load shedding—caused by overloaded infrastructure, illegal connections, and lack of upkeep. Eskom’s takeover could address these issues more effectively.
Historically, municipal electricity revenue has cross-subsidized other services. With Eskom ring-fencing payments under these agreements, Professor Mamphweli suggested the impact on municipal budgets depends on better overall budget management. Many municipalities end financial years with surpluses in other areas, indicating potential to redirect funds without relying solely on electricity cross-subsidization.
Non-compliant municipalities risk removal from the debt relief program and immediate liability for full outstanding debts. Eskom could then pursue credit control measures, including court actions to freeze or take over municipal assets. This could lead to dire financial consequences.
Structural weaknesses contributing to the debt—reported at R85.2 billion for participating municipalities by late 2025—include lack of skills and capacity in revenue collection, governance collapses, and inability to implement projects like meter installations despite available budgets.
On balancing financial discipline with social equity amid affordability and energy poverty challenges, Professor Mamphweli pointed to existing protections. Indigent households can register for 50 free basic kilowatt-hours monthly. The minister is reviewing potential increases. Tariffs like the rural flexi tariff cushion poorer users, who pay less than those in affluent areas.
In the context of South Africa’s energy transition, Professor Mamphweli emphasized renewables’ role, citing a recent mini-grid launch in Mabvete, Limpopo, for low-cost rural supply. He advocated a balanced just energy transition that leaves no one behind, including worker involvement, repurposing coal stations, retrofitting emissions tech, training programs (e.g., at Kati power station for mini-grids), and procuring renewables with high local content to create jobs. The Integrated Resource Plan targets 40% renewable contribution by 2039, supported by the South African Renewable Energy Master Plan for local manufacturing of solar PV, wind, batteries, and related technologies to boost economic growth, as electricity remains a key input.