Looking for light on Eskom threat

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Eskom threats (again)
Many of you will have seen that Eskom have published a Legal Notice in Thursday 12 October EP Herald announcing proposed ‘Interruption of Bulk Electricity Supply to Makana Local Municipality.’ GRA has been making enquiries to get clarification, and asking Makana to make an explanatory statement.

The Eskom Notice is causing worry for residents and damage to business
confidence which is already fragile. Communication by Makana Council would cost
nothing, and it would help save jobs (businesses have to make decisions whether
Makana is a good place to invest).

Councillors and staff may be trying to satisfy Eskom, but harm is being done by not having the confidence to be open and transparent with the public. Ironically, this approach makes wrong-doing look more plausible as it feeds speculation and rumour, denying people the facts.

As with other issues such as water outages, people want to know where they stand, how long the water outage might last and what is the cause. Members tell GRA how grateful they are for being kept informed, even though GRA cannot necessarily speed up the repair. Equally, we need to be informed whether there is a high risk of electricity outages in Grahamstown from 8 December as indicated in the Eskom notice.

What is the situation?
At the moment, from the information available to GRA, we would say that this Eskom threat is a tactic to ensure that next month Makana pays over all of its Equitable Share grant, about R30 million, straight to Eskom. In other words, we do not believe there is a significant risk that Makana will be subject to electricity interruptions.

On the other hand GRA will submit a response to Eskom as advertised below. You can see our letter responding to the last threat in January 2017 at:  http://grahamstownresidentsassociation.co.za/wp-
content/uploads/2016/04/EskomLetter11Jan17.pdf The closing date for comments is close of business on 16 November. We will get more information to you as soon as relevant officials give us more information. Even better, we hope Makana will make a statement very soon.

Background Information
As you know Makana have been highly indebted to Eskom for some years. The last big crunch came around December 2016 and a new payment plan was agreed at the start of 2017. The agreement basically meant that Makana must pay the current account each month and use a lump of Equitable Share grant each quarter to pay off the R55m arears over a period of about three years.

Only three months into the plan, by March 2017 Makana started defaulting again. In June Eskom made warnings as the debt had expanded to over R68m. An emergency meeting with Eskom in East London agreed an interim solution that Makana should pay almost all its Equitable Share grant to Eskom in July and R5m per month (against a variable monthly bill that peaks in winter around R14m and falls to about R8m in summer months). Makana would then catch up again by using the November Equitable Share grant.

Having made this agreement, the R33m Equitable Share grant was paid in July, but
not the agreed monthly R5m payment for July or August. In September R5m was paid, and a further R8m was paid on 6 October (presumably to cover the non-payment in July/ August). We will see whether Makana will make the October payment now that Eskom have issued this notice.

Earlier this year GRA spoke at length with a senior manager at Eskom because it is obvious that Makana is not making any progress in paying down the debt which remains more than R55m. It was explained that Eskom cannot issue legal proceedings until it has followed due process, which includes a period of interrupting supply to prove that they have tried every option to obtain payment.

At present the periodic threats from Eskom ensure that Makana has little choice other than paying over the Equitable Share grant, which is provided by central government for service delivery. For now this is sufficient to stave off the threat of power cuts.

All the while this means that other smaller suppliers go unpaid and services suffer. Makana are attempting to solve this impasse through improving revenue and debt collection, they also aim to sell land, and look at any measures which can raise income. What they steadfastly ignore is the need to control expenditure, which is where it is hoped that the seconded Municipal Manager promised by MEC for CoGTA will make the necessary changes.

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