Johannesburg Mayor Dada Morero speaks with Electricity and Energy Minister Kgosientsho Ramokgopa.

• Johannesburg Mayor Dada Morero assured residents the lights would stay on after Eskom threatened to cut power over the city’s R5.2 billion historic debt.
• An intervention brokered by Electricity and Energy Minister Kgosientsho Ramokgopa establishes a ring-fenced revenue system and a partnership between Eskom and City Power.
• Ramokgopa declared Johannesburg “too big to fail” and a “sovereign problem”.
  

Johannesburg Mayor Dada Morero has assured residents that the lights will remain on.

This after Eskom threatened last week to cut power to the city if the R5.2 billion historic debt is not paid by the June deadline. The city owes a further R2 billion for its current account.

On Tuesday, a new strategy to ring-fence City Power revenue and establish a direct partnership between Eskom and City Power was announced to the media at City Power’s headquarters in Reuven.

The intervention, brokered by Electricity and Energy Minister Kgosientsho Ramokgopa, Morero, and Eskom group executive Dan Marokane aims to establish a permanent solution.

The upcoming payment framework pivots heavily on financial ring-fencing to ensure electricity revenue is strictly protected and channelled back to Eskom.

READ | Eskom threatens to cut Joburg’s power over R5.2bn debt

This would address a critical revenue shortfall, with Morero admitting the city had not collected enough funds to cover its consumption, which previously led to the collapse of last year’s payment agreement.

Johannesburg is one of a handful of municipalities that will sign distribution agency agreements (DAAs) following consultation processes set to start next week.

DAAs are contracts between the metro and Eskom, under which Eskom takes over services, provides skill development and training, helps with the installation of smart meters, and collects revenue on behalf of Johannesburg.

Speaking to the media on Tuesday, Ramokgopa said the entities reached an agreement that included settling the current account.

“The City experienced a number of challenges from the end of last year leading up to the beginning of this year, and they were unable to keep up with the contributions of their payment and Eskom, with the provision of their [previous] agreement, then issued a notice of either interruption, disruption, or discontinuation of bulk electrical supply to the city. And that’s why we are here today to see how best we can help keep up the provisions of that agreement,” he added.

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Ramokgopa said there was no agreement but rather a reaffirmation of the previous agreement on a pay structure.

The agreement stated that the city must keep up its current account and find a way to service the debt.

He said:

“There is no other way of disguising this. It is the powerhouse of the South African economy, the epicentre of the financial markets, not just here but across the continent.”

Second, Ramokgopa added, it would be unfair to paying customers to shut off their electricity.

He said:

He said the problems had to be resolved because the debt owed to Eskom by municipalities was more than R114 billion, and had “ballooned” from the R105 billion owed last year.

“What that does is threaten the liquidity, over time the solvency, and the growing concern of Eskom.”

Ramokgopa added that Johannesburg was a sovereign body because of the bill’s size, and the city’s contribution to the economy.

“That R5 billion [debt owed by Johannesburg] as a share of the R114 billion, means that Eskom will not be able to be a growing concern at the current bill if [the city] doesn’t collect [revenue],” he said, adding that this would “undermine the entity’s ability to expand and modernise the country’s infrastructure”.

“We must resolve this. And that is why we are resolving it municipality by municipality. The challenges [in Johannesburg] will be completely different to the challenges in any other municipality,” Ramokgopa added.

Editor’s note: This article has been updated with additional information.