Eskom’s plan to seize control of electricity distribution and revenue collection in dozens of defaulting towns is intensifying the constitutional conflict between local and national government. The South African Local Government Association (SALGA) has warned that the state utility’s strategy—intended to resolve a rapidly escalating municipal debt crisis—could amount to an “unconstitutional seizure” or “takeover by stealth” of municipal powers.

This sweeping intervention comes as municipal arrears to Eskom have soared to R103.5 billion as of August 2025.

Eskom’s Urgent Intervention: DAAs

The mechanism driving this dramatic shift is the Distribution Agency Agreement (DAA). Under a DAA, Eskom is appointed as an agent to manage the municipality’s electricity function, which includes maintenance, repairs, and crucially, the collection of revenue. For consumers in affected areas, this means they will no longer pay the municipality for electricity, but rather pay Eskom directly.

The need for urgent action stems from the failure of many local governments to comply with the municipal debt-relief programme, which began in March 2023. The National Treasury reported that 47 municipalities remain in default and will transition to DAAs as an interim measure.

According to National Treasury, the DAA pathway is intended to stabilise cash flows, improve payment discipline, and serve as a “bridge to longer-term structural reforms”. Eskom has collaborated with the Department of Mineral Resources and Energy on various solutions, including DAAs and prepaid supply models, to ensure sustainable service delivery and contribute to Eskom’s financial stability through improved billing.

In one prominent case, Deputy President David Mabuza announced in June 2021 that Eskom was preparing to take over distribution and billing at the beleaguered Maluti-a-Phofung local municipality in the Free State, which then owed Eskom over R5 billion. Eskom and the municipality signed a service level agreement, with Eskom committing to training and transferring skills to local workers.

Constitutional Clash: SALGA Raises the Alarm

SALGA views the proposed agreements as a direct threat, asserting that electricity reticulation is a function explicitly assigned to municipalities under Schedules 4B and 5B of the Constitution.

The association warns that bypassing due process—such as council resolutions and feasibility assessments—would “erode municipal autonomy and compromise democratic accountability”. Critically, SALGA fears that local communities will lose their right to hold elected municipal leaders accountable for electricity delivery.

SALGA President Bheke Stofile highlighted the imbalanced public narrative surrounding municipal finances. While the R210 billion owed by municipalities to Eskom and water boards is frequently publicised, the staggering R416 billion owed to municipalities by households, businesses, state-owned enterprises, and government departments is often overlooked. Stofile argued that if municipalities are to deliver services sustainably, “every sector must honour its obligations,” emphasizing that “Rescue tools must not become backdoor takeovers”.

Implementation and Mixed Results

Despite the aggressive push for DAAs, only two agreements—in Maluti-a-Phofung and Emfuleni (Vanderbijlpark)—have been concluded, both mandated by court order.

The outcomes soar debt to only begin declining in the agreement’s fourth year.

• Fees and Allocation: The agreements include administrative fees payable to Eskom: 10% in the case of Maluti and 4% in the case of Emfuleni. The revenue collected is allocated first to the bulk purchase current bill, then to undefined “cost to serve” (including fees and capital expenditure), and finally to arrear debt.

DA MP Deandre De Bruin suggested that the Eskom takeover in Maluti-a-Phofung could further hobble the municipality and threaten its ability to manage future debt. Energy analyst Chris Yelland commented that the DAAs might turn out to be a “take-over by stealth” that signals the path forward for other defaulting municipalities, as it seems unlikely the historic arrear debt will ever be fully paid off.

Looming Legislative Battles

The battle for control over electricity infrastructure extends to legislative halls. SALGA has actively challenged Nersa’s bulk electricity tariff determinations, although their application against the MYPD5 tariff increase was dismissed.

More significantly, SALGA has challenged the definition of “reticulation” proposed in the Electricity Regulation Amendment Bill of 2024. SALGA argues that defining reticulation as only concerning the conveyance of electricity at or below 11kV, while excluding “distribution and trading,” strips local government of its constitutional authority over electricity distribution in its jurisdiction. SALGA lobbied the President to suspend the operation of this new definition, arguing that Parliament should remove the definitions of “reticulation” and “distribution power system” from the Act entirely.

Eskom, which warned that the municipal debt could surpass R300 billion by 2030 without urgent intervention, continues to move ahead with its Distribution Agency Agreements, setting the stage for a protracted legal and political struggle over the governance of South Africa’s vital electricity sector