Olamilekan Okebiorun | Olamilekan is a business journalist covering markets, technology, and changing landscape of African economies for Business Insider Africa. He writes with a focus on how innovation, policy, and entrepreneurship are shaping opportunities across the continent
South Africa’s commercial capital and Africa’s richest city, Johannesburg, is facing rising pressure over its worsening financial troubles after civil society group Public Interest SA threatened legal action against the city administration over what it described as a deepening governance and debt crisis.
Civil society organisation Public Interest SA has given Johannesburg 14 days to present a financial recovery plan or face possible court action over a worsening power debt crisis tied to state utility Eskom.
As part of its demands, Public Interest SA wants Johannesburg to provide a transparent recovery plan detailing debts owed to Eskom and other creditors, repayment timelines, and measures to protect electricity revenue.
The group also called for stronger financial controls, improved oversight systems, action against wasteful expenditure and consequence management for officials implicated in misconduct.
Public Interest SA chairperson Tebogo Khaas warned that failure to act could expose current and former officials to disciplinary, civil and criminal proceedings.
“Public Interest SA reserves the right to approach a court of competent jurisdiction for appropriate relief, including the institution of civil and other proceedings against the city and implicated officials, to give effect to the demands set out herein.”
Eskom escalates pressure over unpaid debt
In an official statement issued last week, Eskom said the City of Johannesburg and its electricity distributor, City Power, owed the utility more than R5.2 billion (over $308 million) in overdue payments, excluding an additional R1.58 billion (over $90 million) current account payment due on June 5.
“As a result of CoJ/CP’s continued failure to honour its Electricity Supply Agreement with Eskom, including repeated defaults, Eskom has been forced to issue a notice of its intention to reduce, interrupt and/or terminate the supply of electricity to certain bulk supply points against the City of Johannesburg and City Power,” the utility said.
According to Eskom, it had spent more than two years trying to assist the metro in meeting its obligations, but continued non-payment forced the company to escalate the matter.
“Eskom has been working with the City of Johannesburg (CoJ) and City Power (CP) for over two years to support the metro in meeting its payment obligations,” the utility added.
Johannesburg’s power crisis sparks wider economic fears
The development has intensified fears over electricity stability in Johannesburg, Africa’s richest city and South Africa’s financial centre, home to major banks, telecom firms, mining companies, multinational corporations and the Johannesburg Stock Exchange, Africa’s largest stock exchange by market capitalisation.
For years, South Africa has battled electricity shortages and rolling blackouts that disrupted factories, mines, hospitals, transport systems and small businesses.
As a result, companies and households have spent heavily on generators, solar systems and backup power solutions. The crisis has also exposed deeper cracks in Johannesburg’s finances, including reports that the city lacks funds to cover previously promised wage increases for workers.
Johannesburg says dispute can be resolved
Johannesburg mayor Dada Morero said during a media briefing on Wednesday that the challenge extends beyond the city and affects several municipalities across South Africa.
“We will not fight Eskom. We will work with the Minister of Electricity and Energy and the South African Local Government Association to resolve this challenge. We are on track to ensure that we resolve this dispute with Eskom,” Morero said.
He added that City Power had introduced a turnaround strategy that included reforms in trading services.
Public Interest SA rejects political solution
At the same time, Public Interest SA warned that political negotiations cannot replace accountability and proper financial management, according to local news outlets.
Khaas said the organisation had formally written to the city demanding urgent corrective measures.
“Further concern arises from recent remarks made by mayor Dada Morero during the state of the city address, wherein it was indicated that the city intends approaching the minister of electricity and energy Kgosientsho Ramokgopa in pursuit of a ‘political solution’ to Eskom’s demands,” Khaas said.
“Public references were similarly made to debt management principles associated with the South African Local Government Association, including the need for robust implementation of municipal credit control policies, consequence management, and approaches relating to irrecoverable debt.”
According to Khaas, engagement between different arms of government cannot replace “compliance with the law, proper financial accountability, sound financial management, and adherence to the Municipal Finance Management Act.”
He also warned that South Africa’s National Treasury could impose conditions on funding allocations to Johannesburg because of worsening governance concerns.
Source: africa.businessinsider.com