The municipal debt to Eskom in South Africa has reached a staggering R120.26 billion as of July 2026. This growing crisis requires urgent attention and drastic measures to prevent communities and services from being crippled. According to the Constitution and the Municipal Finance Management Act (MFMA), municipalities facing financial distress should be treated as such, allowing for more severe national and provincial intervention.
The MFMA provides a framework for municipalities in financial distress, enabling the province and national government to step in and provide assistance. This can include imposing a financial recovery plan, withholding grants, or introducing conditional spending. In extreme cases, the municipality can be placed under administration, and the council suspended, with an administrator or technical teams appointed to manage the municipality's affairs.
Eskom has struggled to collect payments from defaulting municipalities, with 14 municipalities notified in March 2026 that their electricity supply could be cut off unless they paid their debts. The National Treasury set a deadline of September 1 for failing municipalities to appoint Eskom as an agent, but none of the municipalities complied. The South African Local Government Association has requested an extension of the deadline to give municipalities more time.
Eskom has also tried to encourage struggling municipalities to switch to prepaid systems, planning to install 6.2 million intelligent devices by March 2029. The Treasury is implementing a separate initiative to install 250,000 smart meters in the worst-affected municipalities. However, many municipalities have not widely adopted the prepaid system, and Eskom continues to face challenges in collecting payments.
According to Electricity and Energy Minister Kgosientsho Ramokgopa, 83 municipalities are in formal debt-recovery processes, with 71 participating in the Treasury's Municipal Debt Relief Programme launched in April 2023. Eskom has also focused on getting municipalities to agree to debt repayment arrangements through distribution agency agreements, which allow Eskom to partner with municipalities and take over billing, distribution, and collection.
Municipalities face persistent Eskom debt challenges due to lack of capacity, poor governance, incompetence, and corruption. Non-payment by citizens and businesses has also contributed to the problem, creating a vicious cycle of debt and economic decline. Many municipalities increase rates while failing to deliver public services, further exacerbating the issue.
Eskom is exploring alternative solutions, including allowing customers to make payments directly to the power utility, and introducing credit control measures. However, these measures must be balanced against the need to maintain energy security and stability. The power utility is also working with the Treasury and Cogta to develop a comprehensive solution to the municipal debt crisis, which will require cooperation and commitment from all parties involved.
Key points
- Municipal debt to Eskom reaches R120.26 billion
- Eskom struggles to collect payments from defaulting municipalities
- Prepaid systems and debt repayment arrangements are being explored as solutions
