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All municipalities buy their energy in bulk from Eskom and, according to the Nersa guideline, this constitutes around 74% of the tariff. Image: Bloomberg
- A Superior Court has rejected Pioneer Foods’ offer to prevent Eskom from cutting off power to Walter Sisulu Township in the Eastern Cape.
- Pioneer operates a facility in Aliwal North, which is one of the companies affected by Eskom’s decision.
- The municipality is one of the top five defaulters in the Eastern Cape.
Eskom’s drive to collect debt from defaulting municipalities has been bolstered by a Superior Court ruling rejecting an offer from Pioneer Foods to overturn Eskom’s decision to cut power to the municipality of Walter Sisulu in Eastern Cape.
The food producer, which owns brands such as Sasko bread, Weetbix rice and Spekko rice, is one of the key businesses in the region affected by the decision. It operates a facility on Aliwal North.
In what Eskom described as a “landmark ruling,” the Johannesburg High Court rejected Pioneer’s request on Tuesday, strengthening the power company’s ability to collect unpaid revenue.
The municipality is one of the top five defaulters in the Eastern Cape, owing Eskom a total of R1.3 billion at the end of July.
Municipalities across the country owe Eskom more than 30 billion rand, and in recent months it has taken control of bank assets from defaulting councils, as well as seizing tracts of land and personal property from offenders.
The power generator, whose own debt has soared to nearly R500 billion, is struggling to stabilize its balance sheet, which has contributed to myriad operational problems. The company has also been affected by rising costs of its power generation program and the diversion of funds through irregular payments to contractors.
The court criticized Pioneer for seeking legal redress before exhausting available domestic remedies, such as filing a dispute with the regulator, Nersa.
The ruling stated that Pioneer Foods, as a client of the municipality, had “no legal rights” to take the case against Eskom to court and detailed how the municipality since 2017 has not fulfilled its commitments to Eskom, including Lack of response from Pioneer to a public notice to affected parties that was published in local media.
The court said the company was “clinging to straws.”
Pioneer Foods insists it had a “compelling case and the judgment is wrong” and said it was considering its next step.
The company, which employs about 130 people at the Aliwal North plant and its associated warehouse, noted that it had diligently paid its electricity bill to the municipality over the years.
“At this stage, the electricity remains on, however, clearly we cannot operate the plant if the supply to the city is cut due to non-payment of the historical debt contracted with Eskom by the local municipality,” the company said.
He said running the mill on standby electricity would not be a viable option given the production requirement of the Aliwal North operation.
In September, Eskom secured farmland valued at R2.5 billion as collateral for the debt of the Matjhabeng municipality in the Free State.
In the same month, Eskom seized the bank account of the impoverished Maluti-a-Phofung for more than R5.3 billion in debt.
Eskom CEO Andre de Ruyter has emphasized that the energy company, which is in the process of implementing its restructuring plan, focused on stabilizing the balance sheet and maintaining the company’s infrastructure, will intensify its collection efforts for debts.
