The Johannesburg High Court has ruled that Eskom can seize the bank accounts of the local municipality in the town of Matlosana in the North West Province after the municipality reneged on previous undertakings and ignored two court orders to pay hundreds of millions of rands in unpaid electricity bills. .
Acting Judge Grace Goedhart said Eskom was required by the Public Financial Management Act to take effective and appropriate action to collect all revenue owed to it.
“It gave the municipality ample opportunity to meet its commitments,” she said.
The municipality acknowledged its debt to Eskom at the end of November 2019. It then owed more than 383 million rand.
A settlement agreement, detailing what was to be paid and when, in terms of current account and arrears, was made a court order in August 2020.
The municipality reneged on the agreement.
In December 2020, Eskom returned to court and won another order, confirming a second repayment agreement, under which the municipality would pay R120 million in a week, then monthly installments to pay off arrears and monitor its account. running. .
The municipality again failed to comply with the court order, and in May Eskom issued a writ of execution to seize the movable property.
At this point, the municipality sought to engage with Eskom, offering consultation through processes under the Intergovernmental Relations Framework Act (IRFA). But Eskom said this process did not affect the December court order with which the municipality was obliged to comply.
In August 2021, Eskom issued a writ of execution for R228 million and ordered the sheriff to seize two of the municipality’s bank accounts and take control of the money in them.
The municipality then launched the application which was submitted to Judge Goedhart, seeking an order prohibiting Eskom from taking the money pending the outcome of the IRFA dispute resolution process.
In its request, the municipality indicated that it had cash flow problems due to the low collection rate and the impact of Covid. The seizure of her bank accounts prevented her from paying service providers, employees, beneficiary grants and day-to-day running costs. This had an impact on the community as a whole and its ability to render the services mandated by the Constitution.
He denied being in “willful default” of the order.
But Eskom said the municipality had not, as of September 2021, declared a dispute under the law. Nor had it provided the requested financial documents to enable Eskom to assess the municipality’s inability to pay what it owed.
“The obvious consequence is that the backlog of debt is growing…by September 2021 it was now owed over R814 million,” the judge said.
The electricity utility had said that despite the work of an interdepartmental task force, the municipal debt owed to it had “increased exponentially”, reaching R35.7 billion at the end of April 2021. The municipality local Matlosana was one of the top 20 “failing municipalities”.
Justice Goedhart said it was clear municipal debt had become a national crisis and no service provider could continue to provide services without being paid.
She said the municipality only raised the possibility of a dispute resolution process after Eskom issued the first writ.
Eskom had agreed to engage but warned from the outset that the negotiations did not absolve the municipality from complying with the December 2020 court order.
“On the facts of this case, Eskom did what it could and gave the municipality ample opportunity to comply with its undertakings and the court orders,” Judge Goedhart said.
“IRFA, and the processes it contemplates, do not provide a basis for defeating a writ that has been issued in terms of a valid and enforceable court order. The municipality is expected to be a role model and behave in an exemplary manner in its dealings with others, including other organs of the state,” she said, calling the ban request “unacceptable.”
She said the municipality had given no details of its actual resources and the steps it had taken to ensure compliance with the court orders it had consented to.
She noted that it would be “against the rule of law and a rule of law” if state bodies, such as the municipality, which do not comply with court orders, were allowed to “cancel » Orders issued as a result of non-compliance. .
She dismissed the municipality’s application, with costs.