Story audio is generated using AI
The City of Ekurhuleni owed creditors R7.4bn at end-May, including R5.758bn to Eskom and R555m to Rand Water.The figures were disclosed in a written reply by Gauteng finance MEC Nkululeko Dunga to questions from DA Gauteng MPL Khathutshelo Rasilingwane in the provincial legislature.Dunga, who served as Ekurhuleni’s MMC for finance before becoming MEC, was removed from the role by mayor Nkosindiphile Xhakaza in June 2024 after the metro failed to pass its budget.The latest figures come just months after Eskom issued a Promotion of Administrative Justice Act (Paja) notice of its intention to interrupt or reduce bulk electricity supply to Ekurhuleni over unpaid electricity accounts. The dispute was resolved in March when the parties reached a court-backed payment agreement under which the metro paid R1.7bn upfront towards a R3.4bn debt and undertook to settle the balance over 18 months while keeping current accounts up to date.The metro has also faced sustained scrutiny over its financial management. In May, parliament’s standing committee on public accounts called Ekurhuleni to account over Special Investigating Unit investigations, including findings that 208 municipal properties worth about R58m had been fraudulently transferred out of municipal ownership. The figures show the metro also owed R669m to contractors, R294m to provincial government departments, R91m to suppliers of goods and services, R4.4m to municipalities and R907,000 to other state entities.At the same time, the city had R2bn in immediately available cash, meaning its cash reserves were insufficient to cover even half of its outstanding creditor obligations. The legislature’s reply also indicated that some creditors had been outstanding for more than 120 days.Municipal finance analyst and group chief adviser at Ntiyiso Consulting, Miyelani Holeni, said the figures point to a structural liquidity problem rather than a temporary cash-flow shortfall.“This is a severe liquidity crisis, not merely a cash-flow timing problem,” Holeni said, noting that the city’s creditor balance is more than three and a half times its immediately available cash. He said the persistence of the debt suggested the problem is structural rather than a one-off, year-end accounting issue.This is a severe liquidity crisis, not merely a cash-flow timing problem.— Miyelani Holeni, Ntiyiso Consulting chief adviserHoleni said the concentration of debt is particularly concerning, with Eskom accounting for about 78% of the city’s total creditor balance.According to Holeni, prolonged nonpayment increases the risk of electricity load reduction and water throttling, enforcement measures that Eskom and Rand Water have previously used against municipalities that have fallen behind on payments. He also noted that Ekurhuleni has previously entered into a court-backed repayment arrangement with Eskom, raising questions about whether fresh arrears have accumulated since then.Holeni said the city’s financial position could also have broader implications for service delivery.He warned that unpaid contractors could delay infrastructure maintenance despite budget allocations, while continued financial strain could make it more difficult for the municipality to access capital markets in future.To improve the metro’s financial position, Holeni said Ekurhuleni should strengthen revenue collection, diversify its revenue base beyond electricity sales and improve the collection of property rates and other municipal income. He noted that the metro has appointed service providers to improve collections in underperforming areas, though it remains to be seen whether those measures will materially improve cash flow.Business Day requested comment from Ekurhuleni mayor Nkosindiphile Xhakaza through his spokesperson, who declined to comment.Business Day
