From left to right: Narend Singh, Deputy Minister of Forestry, Fisheries and the Environment; Kgosientsho Ramokgopa, Minister of Electricity and Energy; President Cyril Ramaphosa; Velenkosini Hlabisa, Minister of Cooperative Governance and Traditional Affairs (Cogta); Salga President, Bheke Stofile; and Dr. Namane Dickson Masemola, Cogta Deputy Minister. Picture: GCIS.
The Cabinet will, in the next three weeks, consider recommendations to enact legislation forcing the government departments owing municipalities a large chunk of the R347 billion in arrears for electricity to pay up in a set two-month period or have the amounts sequestrated from their allocations.
Minister of Co-operative Governance and Traditional Affairs (Cogta), Velenkosini Hlabisa, and Minister for Electricity and Energy, Kgosientsho Ramokgopa, said yesterday that government departments underlying the sustenance of local government – including Water and Sanitation, Human Settlements, Electricity and Energy, Treasury, Cogta, and Transport – had at Cabinet level been assigned to formulate turnaround strategies for municipalities, with Cogta as the vanguard.
The ministers were speaking during a panel discussion of the Municipal Just Energy Transition conference in Johannesburg yesterday.
The proposal for financial sequestration comes as municipalities collectively owe the power utility R78bn as at the end of July, Ramokgopa confirmed, saying that results from the Municipal Debt Relief Programme indicated that 78% of the municipalities that had qualified for preconditions had slid back to defaulting.
“There is a figure that is even more telling. What is owed to municipalities by various customers sits collectively at R347bn, seven times bigger than what municipalities are owing Eskom,” Ramokgopa said.
“We were talking informally with Hlabisa that if, as a starting point, national and provincial departments pay municipalities with the same level of enthusiasm, you will find that the R347bn or so will be paid. We want to take that proposal to Cabinet. In fact, it shouldn’t even be a Cabinet resolution, you must just pay.”
Hlabisa said Cogta had established a Results Management Office wing comprising experts in various disciplines, which is to assist municipalities to supplement scarce skills on critical projects and would be mandated to give quarterly reports on the success rate.
He said another unit, the Municipal Infrastructure Support Agent (MISA), had been established to undertake projects at cost and in time to help municipalities utilise their full budget allocations.
However, he said there was a low uptake to assist municipalities on infrastructure projects, and many municipalities failed to spend and returned back funds to the National Treasury.
“Many are refusing to co-operate or get into MISA, then you know why. I am sure you know why, because MISA will spend every rand and cent and finish it, but they will take control of the money and account for how the money was used,” he said.
David Masondo, the deputy finance minister, said Treasury was at advanced stages of developing instruments for municipalities to source finance from the market with government guarantees.
He said reforms in the national electrification programme to accommodate alternative sources of energy would allow municipalities to source finance in the open market, with guarantees on their allocation from the national government.
“Your creditworthiness is going to be an issue. It should be an issue, but we have also said it should be possible for municipalities to embark on project finance. Entities should be allowed to raise money for particular projects,” Masondo said.
“City Power should be able to go to the market to raise money and finance their energy infrastructure. Green bonds are accommodated in the framework that we already have.”
Meanwhile, President Cyril Ramaphosa left the door open to amendments to the Electricity Regulation Act (ERA), which the South African Local Government Association (Salga) has threatened to take government to court on, as it objects to a part they said would undermine the exclusive right of municipalities, as outlined in the Constitution, to reticulate electricity.
Salga’s deputy president, Xola Phakathi, said that opening of access for the private sector to generate profits from municipalities core revenue streams of water, electricity and sewerage reticulation sounded a death knell for municipalities, hence the strong objection.
In his speech, Ramaphosa said he understood that Salga would like some exceptions to be inserted once the legislation was implemented, and indicated a willingness to entertain further discussions on those exclusions ahead of the act’s implementation.
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