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Free State hands over farms to Eskom as security for debt owed

The title deeds of the farms will be endorsed in favour of Eskom until the debt dispute between Eskom and the municipality is finalised.

Devdiscourse News Desk | Pretoria | Updated: 16-09-2020 15:17 IST | Created: 16-09-2020 15:17 IST
Free State hands over farms to Eskom as security for debt owed
“This step on the part of Eskom is a result of the repeated failure by the municipality to adhere to its payment obligations to Eskom for the bulk supply of electricity,” said Eskom. Image Credit: Twitter(@SAgovnews)

Matjhabeng Local Municipality in the Free State has agreed to hand over its 139 farms to Eskom as security for a debt owed.

"In its ongoing efforts to recover more than R3.4 billion in unpaid debt owed by Matjhabeng Local Municipality, the municipality has agreed to hand over to Eskom 139 farms belonging to the municipality as security on the debt. The farms are valued at approximately R2.5 billion," said the power utility on Tuesday.

The title deeds of the farms will be endorsed in favour of Eskom until the debt dispute between Eskom and the municipality is finalised.

This agreement has been made an order of a high court in the Free State.

"This step on the part of Eskom is a result of the repeated failure by the municipality to adhere to its payment obligations to Eskom for the bulk supply of electricity," said Eskom.

As part of the agreement, the municipality has withdrawn its application in which it sought to uplift the attachment of its bank account by Eskom, which was granted on 4 September 2020.

Eskom has agreed to uplift the attachment of the account and the account was handed back to the municipality. The funds in the account, namely R2.7 million, will remain attached and in the care of the Sheriff of the Court.

The power utility has been involved in numerous court processes since 2014 when the municipality's outstanding debt totalled R372 million and employed other collection mechanisms to recover the funds.

Eskom said the municipality has consistently failed to honour its obligations and payment agreements, as well as court orders, resulting in debt escalating to R3.4 billion over the period.

The total outstanding municipal debt of R31 billion, as at end of July 2020, continues to threaten Eskom's sustainability.

Eskom said municipalities have a responsibility to fulfil their financial obligations for the bulk supply of electricity.

Meanwhile, in the cases involving the Vaal River Development Association and the Lekwa Rates Payers' Association versus Eskom, following the judgment of the Pretoria High Court on 28 August 2020, Eskom applied for leave to appeal against the whole judgment and the orders granted by Judge Millar in the two matters.

Eskom filed its grounds of appeal in both matters involving Lekwa and Ngwathe Municipalities, setting out its basis for challenging the orders granted against it.

Eskom's opposed application for leave to appeal was argued fully in the high court by all sides on 11 September 2020.

On 14 September 2020, the court delivered its decision and granted Eskom leave to appeal the whole judgment and orders of the judgment to the Supreme Court of Appeal (SCA).

"Eskom notes the previous media statements made by some residents' associations and the municipalities following the judgment of 28 August 2020. However, the effect of the court's order in favour of Eskom means that the issue of Notified Maximum Demand (NMD) is now pending before the SCA," said the power utility.

It welcomed the decision of Justice Millar granting it leave to appeal to the SCA.

"The granting of the leave to appeal to the SCA vindicates Eskom's position that it has always sought to act within structures of the law," Eskom said.

(With Inputs from South African Government Press Release)


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