Municipal debt owed to Eskom has escalated into an existential crisis for the South African utility, threatening to neutralize the significant gains achieved through its recent financial and operational turnaround. As of August 2025, municipal debt reached R103.5 billion, having risen by 27% to R94.6 billion at the end of the 2025 financial year in March. Eskom has warned that if the rapid growth trajectory is not addressed, this outstanding municipal debt could exceed R300 billion by the end of the 2030 financial year, an amount nearly equivalent to the utility’s current debt burden.

The problem is structural and intensifying, despite government efforts, including the R254 billion Debt Relief Programme designed to improve Eskom’s balance sheet. The total debt owed by municipalities and metros is R109.4 billion. Provinces across the country are struggling, with Gauteng municipalities owing the largest sum at R29.4 billion, followed by the Free State at R25 billion, and Mpumalanga at R24.7 billion. Significantly, larger metros are increasingly contributing to the non-paying category. For example, the City of Johannesburg failed to fully settle its R1.4 billion current account with Eskom after a negotiated payment plan.

Causes Rooted in Technical and Non-Technical Losses

This systemic financial failure at the municipal level stems from a combination of challenges, including weak governance, a lack of technical expertise, inadequate credit control, and outdated infrastructure. Furthermore, the rapid growth in electricity prices—rising by over 600% in the last decade—has made electricity unaffordable for many South Africans, fostering a culture of non-payment and increased illegal connections.

Research focusing on the City of Tshwane Metropolitan Municipality (CoT) confirmed that both technical and non-technical losses (NTLs) are major causes of revenue loss. NTLs, which are non-physical losses arising from external issues like theft or internal issues like mismanagement, are largely driven by illegal connections, power theft through meter tampering, and cable theft. In fact, illegal connections and meter tampering were found to be the leading causes of electricity losses in CoT. Technical losses, which are naturally occurring losses in transmission and distribution lines, are primarily caused by deficiencies in infrastructure maintenance, aging networks, long distribution lines, and poor workmanship. The issue of high energy losses impacts negatively on service delivery, often resulting in power cuts and customer demonstrations.

Debt Relief Conditions Go Unmet

The government’s Municipal Debt Relief Programme, intended to bring about critical changes in municipal financial behaviour, is conditional. For municipalities to receive the phased debt write-off over 36 months, they must comply with specific requirements, including maintaining a minimum average revenue collection rate, implementing cost-reflective tariffs, and progressively installing smart prepaid meters.

Despite the importance of these conditions, most participating municipalities are failing to meet the basic requirement of paying their current accounts on time and in full. The National Treasury has employed interventions like withholding Local Government Equitable Share allocations from defaulting municipalities to compel financial management improvements. However, entrenched dysfunctionality continues to undermine progress. Of the over 160 municipalities recently classified as financially distressed, only 14 had successfully met the conditions required for debt write-offs as of early 2025.

Path Forward: Smart Meters and Integrated Management

Stakeholders recognize that sustainability solutions require balancing immediate interventions with long-term reforms. Eskom and the government are exploring solutions like Distribution Agency Agreements (DAAs), under which Eskom would temporarily manage municipal electricity services, support tariff setting, and assist with revenue collections.

A crucial intervention involves technology adoption: smart metering solutions have already shown promising results in pilot projects by improving revenue collection. The National Treasury plans to allocate an additional R650 million in the next financial year to expand these smart metering programs. Legislative reform is also necessary, as Eskom and other stakeholders have called for adjustments to the Electricity Regulation Act to enable more proactive credit control measures.

Ultimately, the crisis demands an ‘all-of-government’ response. A dedicated Municipal Recovery Task Team, comprising Eskom, National Treasury, the Department of Cooperative Governance and Traditional Affairs (COGTA), and the South African Local Government Association (SALGA), has been recommended to implement and monitor solutions, aiming to improve governance, enhance collections, and address legislative barriers. These concerted efforts are essential to ensure the long-term financial stability of Eskom and secure reliable electricity service delivery across the nation.