A bold step to stabilize South Africa’s electricity distribution

South Africans could soon see Eskom directly managing electricity in 47 municipalities struggling with mounting debt and chronic service delivery failures. This move, announced in the 2025 Medium-Term Budget Policy Statement (MTBPS), signals a major intervention in the nation’s electricity sector, aimed at stabilizing cash flows and improving collections from municipalities that have long defaulted on payments.

Eskom’s takeover will be implemented through Distribution Agency Agreements (DAAs), where the utility temporarily assumes control of municipal electricity services. Beyond simply supplying power, Eskom will assist municipalities with tariff setting, revenue collection, and the introduction of cost-reflective tariffs to ensure long-term sustainability.

Municipal debt spirals out of control

The MTBPS revealed alarming figures: municipal arrears to Eskom surged from R55.3 billion in 2024 to R94.6 billion in the 2024/25 financial year, a 71% increase in just one year. By August 2025, arrears had climbed further to R103.5 billion.

Despite the municipal debt-relief programme, launched in 2023 to partially write off debts in exchange for regular payments, 75 municipalities still owed Eskom over R100 million each. Emalahleni, home to several Eskom employees due to its proximity to the coal-fired power stations, remains the largest debtor highlighting the irony and complexity of the debt crisis.

National Treasury officials noted that only 24 municipalities have qualified for partial debt write-offs, while 21 have largely maintained payments. The remaining 47 municipalities remain in default, citing weak collections, excessive electricity and water losses, poor maintenance, and inadequate credit control.

DAAs: A temporary bridge to reform

Under DAAs, Eskom will operate municipal electricity services for a defined period. The goal is to:

• Stabilize municipal cash flows.

• Improve payment discipline.

• Introduce cost-reflective tariffs while limiting rebates.

• Lay the groundwork for long-term structural reforms in municipal financial management.

Treasury stressed that this interim measure does not rule out stronger interventions if failures persist. Municipalities will still be responsible for rehabilitating infrastructure using funds from the municipal infrastructure and other relevant grants, focusing on electricity and water networks.

The looming R300-billion threat

Eskom has warned that if municipal debt continues to grow unchecked, it could triple within five years, potentially exceeding R300 billion by 2030. Such a scenario would threaten Eskom’s financial stability and operational capability, placing the entire electricity distribution network at risk.

Eskom maintains that only a coordinated intergovernmental approach, including DAAs and prepaid metering models, can avert a crisis. Previous attempts to cut power to defaulting municipalities led to court battles, as Eskom was required to seek government mediation before discontinuing supply.

Social media and public reaction

The news has sparked discussions across South African communities. Many residents in defaulting municipalities express frustration at ongoing power disruptions, while others question why local governments have allowed debts to spiral unchecked. Social media users have been quick to criticize municipalities, suggesting that Eskom’s takeover is long overdue. Some, however, caution that the move could centralize control and reduce local accountability if not carefully monitored.

What this means for residents

For households in the 47 municipalities, Eskom’s direct control could mean more reliable electricity supply and faster response to outages. However, it may also come with higher tariffs and stricter enforcement of payments. Prepaid metering and cost-reflective tariffs are expected to be rolled out as part of this intervention.

Treasury emphasizes that while DAAs are an interim solution, they are critical to preventing the further deterioration of municipal electricity services and ensuring that Eskom can continue to supply power nationwide.

South Africa’s municipal electricity crisis has long threatened both the financial health of the country’s power utility and the daily lives of residents. With Eskom stepping in, the coming months will be a test of whether these temporary measures can bring long-term stability to an electricity sector under immense pressure.

{Source: My Broad Band}

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