Samwu rejects Eskom’s takeover of electricity distribution in municipalities

Municipal trade union Samwu has strongly rejected Eskom’s takeover of electricity distribution functions in struggling municipalities and the methods being used to impose Distribution Agency Agreements (DAAs) on them.

Samwu is calling on the government to immediately stop enforcing existing DAAs and suspend any attempts to link equitable share allocations, grants or debt-relief programmes to municipalities entering into such agreements.

“We further demand that all existing DAAs be subjected to a proper review, with the full participation of organised labour, municipal councils and affected communities,” it said in a statement.

“No employee may be retrenched, transferred or seconded, or have his or her duties and conditions of service changed, without proper consultation and collective bargaining.”

DAAs involve Eskom taking over the entire electricity distribution function of municipalities that owe it substantial amounts of money, in return for a fee.

Consumers’ payments for electricity purchases are made directly to Eskom, which retains the amount for bulk purchases and other functions in the municipality, with the balance – if any – being paid over to the municipality.

There are currently four such agreements between Eskom and the municipalities of Maluti-a-Phofung, Emfuleni, Merafong and Ditsobotla.

Samwu’s statement comes against the backdrop of a court application by AfriForum to have the agreement between Eskom and Merafong Municipality in Carletonville declared unlawful and invalid. It wants the agreement set aside, arguing that the required legal processes were not followed.

A ‘dangerous’ precedent

AfriForum has also warned that attempts by Eskom and National Treasury to force municipalities into DAA arrangements without following the prescribed legislative framework could set a dangerous precedent.

“Allowing unlawful processes to take root undermines the rule of law and opens the door to further governance failures,” said Morné Mostert, AfriForum’s head of municipal affairs.

The South African Local Government Association (Salga) has also expressed concern about the agreements.

It is part of a working group with National Treasury, Eskom and the departments of Electricity and Energy and Cooperative Governance and Traditional Affairs to standardise the content of the agreements, which Treasury previously described as one-sided in Eskom’s favour.

Eskom nevertheless recently finalised its agreement with Ditsobotla before agreement had been reached on the content of the standard contract.

Meanwhile, time is running out for 14 municipalities that were instructed by National Treasury in March to conclude DAAs with Eskom before 1 September.

If they fail to do so, Eskom may cut off their electricity supply and implement other credit-control measures against them, including attaching their bank accounts. They may also be excluded from assistance and grants from National Treasury.

Not the ‘only solution’

National Treasury has previously indicated that as many as 30 municipalities have been earmarked for DAAs.

Samwu says it is deeply concerned that DAAs are increasingly being presented to municipalities as the only solution to their financial distress and historic debt to Eskom.

This debt has already reached a combined R119 billion and is regarded as the biggest threat to Eskom’s sustainability.

The union is particularly concerned about the implications of DAAs for municipal workers.

“The agreements provide for municipal employees performing electricity functions to be seconded to Eskom while remaining employees of the municipality. They further permit Eskom to appoint its own employees, consultants or contractors to perform municipal electricity functions.

“These arrangements create uncertainty for workers and carry the danger of progressively hollowing out the internal technical capacity of municipalities,” Samwu said.

Treasury under fire

The union rejects the idea that municipalities can be rescued by taking away their ability to generate revenue.

Electricity distribution remains an important municipal function and is one of the most important sources of revenue for many municipalities.

Removing control over electricity revenue while municipalities are still expected to finance other basic services risks worsening rather than resolving the financial crisis facing local government, the union said.

Samwu is particularly opposed to using the equitable share as a tool to force municipalities to sign DAAs.

The equitable share is a state grant paid to municipalities in three instalments each year and, according to Samwu, exists to support municipalities in providing basic services.

It “cannot be turned into a weapon through which National Treasury forces municipalities to surrender control of their functions and revenue streams,” Samwu said.

In July, National Treasury initially withheld these payments from 69 municipalities because they had failed to comply with legislative requirements. This move reportedly resulted in several being unable to pay salaries.

Treasury eventually reversed the decision and released all the payments.

This article was republished from Moneyweb. Read the original here.