Merafong Signs Eskom Distribution Agreement to Stabilise Power Supply and Finances

Under the Distribution Agency Agreement, Eskom and Merafong will work jointly to manage electricity distribution and revenue processes.

Eskom and the Merafong City Local Municipality have formally signed a Distribution Agency Agreement (DAA), making Merafong the third municipality in South Africa—after Maluti-a-Phofung (Free State) and Emfuleni (Gauteng)—to enter into such a partnership with the national power utility. The agreement is designed as a transitional intervention to stabilise the municipality’s electricity distribution system, improve financial sustainability, and restore service reliability to residents and businesses.

A joint statement from Eskom and the municipality describes the arrangement as central to Merafong’s broader turnaround strategy, which focuses on rebuilding public trust, strengthening infrastructure, and boosting local economic development.

What the Agreement Entails

Under the Distribution Agency Agreement, Eskom and Merafong will work jointly to manage electricity distribution and revenue processes. Key provisions include:

• Shared management of electricity distribution and certain retail functions.

• Billing and revenue collection ring-fenced and administered through Eskom’s systems.

• Merafong remains the electricity licence holder, while Eskom provides technical expertise, operational support, and skills transfer.

• Free basic electricity supplied directly by Eskom to qualifying indigent households.

• Continued collaboration with National Treasury to implement long-term municipal financial reforms.

Strengthening Infrastructure and Accountability

The DAA introduces several operational improvements aimed at reinforcing the resilience of Merafong’s electricity system:

• Stronger coordination between Eskom and municipal technical teams.

• Improved maintenance procedures and quicker fault-response times.

• Enhanced infrastructure planning for future upgrades and investments.

• Clearer reporting lines and accountability frameworks.

• More predictable and reliable power supply for households and businesses.

• Protection of existing jobs and structured training for municipal employees.

• Comprehensive skills transfer to enable long-term municipal independence.

Leadership Reactions

Municipal Manager Dumisani Mabuza said the signing represents a renewed commitment to reliable service delivery:

“Today represents more than the signing of a document. It represents a shared commitment to strengthening our electricity network and ensuring residents receive the stable, reliable services they deserve.”

Eskom’s Acting Group Executive for Distribution, Agnes Mlambo, hailed the agreement as a critical step toward stabilising electricity provision:

“This partnership demonstrates Eskom’s commitment to work collaboratively with municipalities to restore operational efficiency and ensure sustainable service delivery, with a strong focus on skills transfer and capacitation.”

National Treasury: DAAs Are a Critical Interim Measure

According to the Medium Term Budget Policy Statement, Distribution Agency Agreements form part of government’s interim support mechanisms for struggling municipalities—especially those burdened with large debts to Eskom.

Municipalities collectively owed the power utility R94 billion as of March this year.

Treasury explained that DAAs allow Eskom to temporarily operate a municipality’s electricity services while:

• Supporting cost-reflective tariff setting

• Reducing technical and non-technical losses

• Improving revenue collections

The objective is to stabilise cash flow and lay the foundation for longer-term reforms in the local government fiscal framework.

However, Treasury warned that the DAA does not preclude stronger interventions should municipalities fail to improve governance or payment discipline.