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Eskom gets tough on municipal debt, attaches Free State farms worth R2.5b

15 September 2020 6:43 PM
Tags:
Eskom
The Money Show
Bruce Whitfield
Adrian Saville
GIBS
Eskom new board
Eskom financial woes
Eskom new management

Is Matjhabeng Municipality just a small fish in a sea of Eskom defaulters? Bruce Whitfield interviews economist Adrian Saville.

Eskom is clamping down on municipalities that owe the beleaguered power utility billions of rands.

In its latest move against defaulters, Eskom secured farmland valued at around R2.5 billion as security for the R3.4 billion it's owed by the Matjhabeng Municipality (Free State).

The title deeds of the farms will be endorsed in favour of Eskom until the debt dispute with the municipality is finalised, it says.

"The total outstanding municipal debt of R31 billion as at end July 2020 continues to threaten Eskom's sustainability. Municipalities have a responsibility to fulfil their financial obligations for the bulk supply of electricity."

The Money Show gets comment from Dr Adrian Saville, CEO of Cannon Asset Managers and Professor at the Gordon Institute of Business Science (Gibs).

It's nice to see them [Eskom] getting what is owed.

Adrian Saville, CEO - Cannon Asset Managers

I worry that there are unintended consequences or spillovers and also that there is a large dose of 'a little bit too late' and that they're chasing smaller rather than real culprits...

Adrian Saville, CEO - Cannon Asset Managers

In view of Eskom not (yet) going after the bigger fish, should we be cynical asks Bruce Whitfield.

The even bigger fish - I'm referring to those that happen under state capture where there are multiples of the municipality amounts that have been being pursued... There are lots of trees that can be shaken here and municipalities with very large debt is just one of them.

Adrian Saville, CEO - Cannon Asset Managers

The cynical observation would be, you're chasing municipalities that overwhelmingly (as you noted in your intro) are in very bad financial shape and you're chasing them for cash flow doesn't seem to be the most obvious, but I guess Eskom has got lots of things it needs to sort out and one of them is in the form of municipal bad debt.

Adrian Saville, CEO - Cannon Asset Managers

It might be a little bit of tail-chasing... It's government that stands behind every Eskom debt and it's government that stands behind municipal debt... but what this demonstrates is that there are processes and systems and procedures that will be put in place and that it draws what I want to say is a very a clear line in the sand...

Adrian Saville, CEO - Cannon Asset Managers

Listen to the enlightening discussion on The Money Show:


15 September 2020 6:43 PM
Tags:
Eskom
The Money Show
Bruce Whitfield
Adrian Saville
GIBS
Eskom new board
Eskom financial woes
Eskom new management

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