Eskom's revenue problem has two ends to it and both of them moved this week. Municipalities owe the utility R119 billion, regarded as the single biggest threat to its sustainability. At the other end, the mining companies that can generate their own electricity keep contracting more of it.
What a Distribution Agency Agreement actually does
The fix on offer to an indebted municipality is to hand over the business. Under a Distribution Agency Agreement, Eskom takes over the municipality's entire electricity distribution function and charges a fee to run it. Customers pay Eskom directly, Eskom keeps what covers bulk purchases and its other functions, and the balance, if any, goes to the municipality. Four are running now, at Maluti-a-Phofung, Emfuleni, Merafong and Ditsobotla. National Treasury instructed another fourteen in March to sign one before 1 September, and has earmarked as many as thirty.
Samwu wants all of it stopped. The municipal workers' union has rejected both the takeovers and the way they are being imposed, and wants government to stop enforcing existing agreements and to stop tying equitable share allocations, grants and debt relief to signing one. It also wants no employee moved or reassigned without proper consultation and bargaining. Electricity is one of the largest revenue sources a municipality has, and stripping it out while the same municipality still has to fund everything else risks making the crisis worse. The equitable share, the union said, "cannot be turned into a weapon through which National Treasury forces municipalities to surrender control of their functions and revenue streams".
Samwu is not the only objection on the record. AfriForum has gone to court to have the Merafong agreement declared unlawful and set aside, arguing the required legal processes were not followed. Salga sits in a working group with Treasury, Eskom and two departments to standardise a contract Treasury once called one-sided in Eskom's favour, and Eskom finalised the Ditsobotla agreement before that wording was settled.
The customers who can generate for themselves
The other end of the base is not waiting for a policy. Anglo American's renewables venture, Envusa, runs 520MW of wind and solar, about 30% of what Anglo's mines get through. Sibanye has contracted 835MW, only a fifth of it operating today, and expects renewables to cover close to two thirds of its South African energy demand by 2028.
Cost is doing the persuading. Exxaro says one 68MW solar plant has cut the grid draw at its Grootegeluk coal mine by 30% and saves it R100 million a year. None of this is an exit. Coal still makes more than 80% of South Africa's electricity, and the executives building the wind farms say Eskom baseload stays essential while battery storage catches up.
Fourteen municipalities have until 1 September. Miss it and Eskom may cut their supply, attach their bank accounts, and Treasury may hold back assistance and grants. Treasury has done a version of this before: in July it withheld equitable share payments from 69 municipalities over compliance failures, several could not pay salaries, and it released the money again.
