By Roxanne Henderson for Bloomberg
Eskom Holdings has taken steps to protect its operations from disruptions after a contractual dispute with Oracle Corp.’s South African unit put its technical support services at risk.
The state power utility confirmed on Monday that it’s involved in the disagreement in which Oracle initially claimed Eskom underpaid it by about 7.3 billion rand ($500 million). While the amount was later reduced between the parties, Oracle rejected Eskom’s settlement offer of 166 million rand and threatened to terminate its services, the power utility said in an emailed statement.
Eskom has “assessed the risks in the event of Oracle withdrawing” its services and put interim processes in place “to reduce the risks of its operations being disrupted”, it said.
Eskom approached a South African court to compel Oracle to continue its technical support services until April 2022 but its application was dismissed last week, it said. It intends to seek leave to appeal.
Debt-laden Eskom is already under pressure from creditors and has struggled for years to provide reliable power, leading to disruptions that ripple through Africa’s most industrialised economy.
A new initiative, #PayIn30, has been launched in an effort to ensure that small and medium-sized businesses (SMEs) in South Africa are paid within 30 days.
#PayIn30 is spearheaded by Business for South Africa, the SA SME Fund, and Business Leadership South Africa and supported by, among others, Business Unity SA, the Small Business Institute and the Black Business Council.
About 2.5 million SMEs account for 10.8 million jobs in South Africa. Transunion data points to 6.4 percent of formal SMEs going into bankruptcy (up 50 percent from last year), with 260 000 jobs lost and another 240 000 at risk as they struggle amid the economic fallout from Covid-19.
With a tightening economy, the banks’ payment holidays coming to an end, and the winding down of the Temporary Employer/Employee Relief Scheme, this was expected to rise to between 10 and 15 percent of small businesses going into business failure next year, with almost a million jobs lost and at risk.
“Covid-19 has made this problem worse,” the business groups said.
By Tom Head for The South African
The Matjhabeng Municipality in Free State has agreed to hand over 139 farms belonging to the administrative region, to act as a security on their R3.4-billion Eskom bill.
The serial defaulter has run up a tab of more than R3.4-billion in unpaid electricity bills over the years. Eskom put their foot down earlier in 2020, severely limiting the supply of energy for the municipality. However, it seems both parties have come to an agreement, and the total cost of the land is believed to be worth R2.5 billion.
This doesn’t clear all of the debt, but it marks a significant – if unusual – agreement between both parties. The deal was facilitated by the Free State High Court, and the title deeds will be signed over to Eskom while Matjhabeng remains in arrears. It is not yet clear what the power utility intends to do with these farms, should the debt stay in place.
The firm issued a statement on the matter earlier on Tuesday, confirming the details of their “land shedding” exchange. They state that all defaulting municipalities still owe them R31-billion, which remains a “threat to sustainability” for Eskom.
“In its ongoing efforts to recover more than R3.4 billion in unpaid debts owed by the Matjhabeng Municipality, the administrative body has agreed to hand over to Eskom 139 farms belong to the municipality, as a security on the debt. The farms are worth approximately R2.5 billion, and the title deeds will be endorsed in favour of Eskom.
“This will remain in place while the debt is unsettled. The order has been made by the High Court in Free State. This step on the part of Eskom is the result of repeated failures by Matjhabeng Municipality to adhere to its payment requirements. The total outstanding municipal debt [for all municipalities] of R31-billion threatens our sustainability.”
In February, the Soweto debt was sitting at R17-billion in unpaid electricity bills.
Eskom spokesperson, Dikatso Mothae said the power utility “continues with initiatives to improve revenue recovery from residential customers”.
These include removing illegal connections, conducting meter audits, repairing faulty or tampered meters and limiting ghost vending of prepaid electricity, installing smart and/or prepaid meters within protective enclosures to prevent tampering, converting customers from post-paid to prepaid and stepping up disconnection of customers not honouring their current accounts
In his State of the Nation Address last week, President Cyril Ramaphosa announced that the ailing Eskom will continue to received further bailouts.
He said the government has a strategy to deal with Eskom defaulting on its loans.
“We will, therefore, table a Special Appropriation Bill on an urgent basis to allocate a significant portion of the R230-billion fiscal support that Eskom will require over the next 10 years in the early years,” Ramaphosa said.
The president also said that Eskom is working hard to recover money owed by municipalities and customers.
Additionally, he said that “the days of boycotting electricity payments are over”.
Meanwhile, according to Mothae, municipal debt is sitting at R20-billion as at the end of March 2019.
“We continue to have discussions with Municipalities, Provincial Government and National Government and the Inter-Ministerial Task Team to find a resolution. We are continuously reviewing Payment Arrangements with municipalities, issuing default letters and then as a last resort we start a PAJA [Promotion of Administrative Justice Act] process when they default which leads to planned power interruptions,” she said.
“However, we normally get interdicted by customers or customer groupings preventing us from interrupting electricity supply and Municipalities typically take payment holiday during these interdicts. Eskom has now started to issue summons to municipalities for the amount in the Acknowledgement of Debt,” Mothae added.
Earlier this year, the Orlando Action Committee said it was willing to negotiate with the President Cyril Ramaphosa on electricity payment.
The Sunday World reported that Gauteng townships have become “a nightmare” for Eskom employees, who are often “intimidated and assaulted when working in these areas”.