Billions of rand that South African municipalities owe Eskom are hindering the State-owned power utility’s plan to restructure and separate its distribution unit, according to chairperson Mteto Nyati.

South Africa’s municipalities owed Eskom R95.4-billion by November as they struggle to collect revenue from customers and available funds are sometimes misappropriated after years of mismanagement.

Eskom completed the unbundling its transmission business last year, a major step in the process to restructure and split the utility into three units. That means the focus now turns to the separation of the distribution arm.

“The municipal-debt challenge has the potential to jeopardise the distribution separation as well as threaten the financial viability and sustainability of the future distribution industry,” Nyati said in Eskom’s 2024 annual report.

The National Treasury in 2023 announced a debt-relief programme to write off Eskom’s debt, provided municipalities adhere to set conditions. The uptake on that has been slow and many councils fail to enforce the required credit controls.

“The board is concerned about the lack of compliance with the municipal debt-relief programme, given that the conditions of the programme prohibit Eskom from pursuing action against non-compliant municipalities,” Nyati said.

Eskom has asked National Treasury to engage directly with non-compliant municipalities to address the issue the issue of non-payment or late payments, Chief Financial Officer Calib Cassim said in the report.