REPORT TO SCOPA ON ESKOM ACCOUNT

1. when the sun rises we work hard to deliver REPORT TO SCOPA ON ESKOM ACCOUNT JUNE 2018

2. CONTENT • DELEGATION • BACKGROUND • ESKOM ACOUNT INFORMATION • REVENUE INFORMATION • CREDITORS INFORMATION • INTERVENTIONS • REVENUE

3. LEKWA DELEGATION • Lindokuhle Blessing Dhlamini Hon. Executive Mayor • Gugu Mhlongo-Ntshangase Municipal Manager • Herbert Shai Director Technical Services • Thokozani Hlatshwayo Deputy CFO

4. BACKGROUND

5. INTRODUCTION • The purpose of the presentation to provide information in relation to the following: • Reasons why the Municipality is defaulting on the Eskom Bulk Purchases Account • Revenue Streams available to the Municipality • Interventions to address the Eskom Account

6. OVERVIEW • Lekwa Local Municipality(MP305) is a Category B municipality situated within the Gert Sibande District in the Mpumalanga Province. • Area: 4585km² • The Municipality is mostly rural in character. • Municipality is a corridor town to three (3) provinces(KwaZulu-Natal, Free State and Gauteng Provinces), major routes(R23-N3 and N11) • Standerton is the main town in the municipality which is a typical medium sized South African town, with a central CBD, industrial areas on the periphery, low density residential development and separation between white and black and rich and poor neighborhoods • Lekwa is also located to the south of the TEKS area (Trichardt, Evander, Kinross and Secunda) which is the economic hub in the region. • The current population is at the municipality is 123 419, Population growth rate of 1.5% between 2011 & 2016, 6th smallest population in the province. • Current indigent registration is recorded at 2047 as at May 2018, however due to the current economic climate and vigorous campaign the number will increase significant.

7. Lekwa – Municipal Snapshot MUNICIPAL SNAPSHOT • Municipality is a corridor town to 3 provinces(KZN,FS and GP), major routes(R23-N3 and N11) • Potential in developing key industries such agriculture, and tourism (Big industries - Astral, Seriti mining(Anglo Coal), Tutuka Power Station) • 80% provision on basic service delivery the last couple of years • Doing comparatively well in terms of access to piped water and sanitation facilities • Negative perception of the Municipality • Trust between the Municipality and Business? • Population growth higher than economic growth • High informal dwellings backlogs • Spatial development and Land use management challenges • Inadequate youth development strategies to respond to the high youth unemployment • Culture of non payments of our consumers which requires political intervention.

8. Lekwa – Municipal Snapshot Economic plans & opportunities relevant for Lekwa • Opportunities in the tourism industry as well as agriculture and agro-processing. • Importance of an active and functional LED (Strategy implementation & Forum) to address the economic challenges. • Building of a Mall – unlocking of massive municipal revenue base(Property rates, service charges) • Support to Rejuvenation of township businesses with initiatives to transform townships and villages from labour and consumption reserves into thriving productive investment hubs. • Unleashing outdoor advertising as a sustainable revenue base

9. Lekwa – Municipal Snapshot BASIC SERVICES BACKLOGS

10. MUNICIPAL SOURCES OF REVENUE

11. REVENUE SOURCES Lekwa – Municipal Snapshot • The municipal revenue base is as follows:

12. BILLING VS HOUSEHOLDS Lekwa – Municipal Snapshot

13. BILLING VS HOUSEHOLDS Lekwa – Municipal Snapshot

14. Lekwa – Municipal Snapshot BILLING VS HOUSEHOLDS(Narrations) • The total active accounts with electricity charges are 27 827, while the total households are 37 334. • +- 7000 are Eskom customers(this mainly includes Morgenzon, Farms and Thuthukani) • These customers are the main defaulters in paying municipal services: • Morgenzon debt book R 83 million • Farms(property rates R 35 million • Thutukani R 2 million • The municipality is experiencing challenges in enforcing credit control due to the fact that Eskom is the distributor to these areas.

15. Lekwa – Municipal Snapshot DEBT COLLECTION • The municipality has identified Top 200 business and Top 200 residentials. • Further to the above, 5 categories have been identified that will be subjected to debt collectors • A tripartite debt collection agreement has been signed with Mpumalanga provincial COGTA and a company of debt collectors to assist with the following services: • Hand over of top 200 business and residential defaulters • Institute recovery mechanism to recovery outstanding debt • Preparation of summons • Obtaining judgements • Negotiate acceptable payment arrangements • Obtain emoluments attachment orders

16. Lekwa – Municipal Snapshot DEBT COLLECTION(Top 5 owing customers per electricity service)

17. Lekwa – Municipal Snapshot DEBTORS AGE ANALYSIS

18. Lekwa – Municipal Snapshot DEBT COLLECTION

19. Outstanding Debt by Government

20. Lekwa – Municipal Snapshot COURT ORDERS

21. ESKOM ACCOUNT INFORMATION

22. ESKOM YEARLY BALANCE MOVEMENT

23. Electricity revenue analysis N1: The variance between municipal electricity billing and cash collection is due to the none payment by customers and other factors

24. ESKOM ACCOUNT PMT SUMMARY(2013 – 2018)

25. Cash collected vs amount paid to Eskom(2013 – 2018)

26. BREAKDOWN OF ESKOM ACCOUNT – 2017/16 – 2017/18

27. CREDITORS INFORMATION

28. CREDITORS AGE ANALYIS 2013-2018

29. INTERVENTIONS

35. BUDGET INFORMATION

36. Budget deficits

37. FINANCIAL RATIOS

38. RECOMMENDATIONS Lekwa – Municipal Snapshot

39. RECOMMENDATIONS Lekwa – Municipal Snapshot