Municipalities will be worse off after lockdown

More municipalities, even some that had a paid-up Eskom account, could run into financial trouble because of the Coronavirus pandemic.

This is according to a presentation by the South African Local Government Association (Salga) made before the National Council of Province’s Appropriations Committee.

The association indicated that the pandemic, coupled with the national lockdown, could mean millions in loss of income for municipalities.

Consumers who would not be able to pay their much higher electricity bills because they were indoors all the time, could have an adverse effect on the already cash-strapped local government sphere.

Salga indicates that there would be little municipalities can do to salvage the situation.

Salga said if residents cannot pay their bills, a 5% drop in income from consumers could cost municipalities an estimated R14 billion. And while Eskom is doing business as usual and continues to demand municipalities to stick to their payment agreements, municipalities would likely default on bulk supply accounts, as municipalities will not be able to use disconnections to put pressure on non-paying consumers.

Salga says this period can even cause municipalities with clean sheets on bulk supply account to actually fall into the Eskom debt trap.