Eskom Shows Signs of Recovery, But Municipal Debt Poses Growing Threat
Viable News Team 
By [Viable Media] | November 2025
Finance Minister Enoch Godongwana says South Africa’s power utility Eskom is showing notable signs of improvement yet the financial strain caused by mounting municipal arrears remains one of its biggest obstacles.
Delivering his 2025 Medium Term Budget Policy Statement (MTBPS) on Wednesday, Godongwana highlighted that Eskom had boosted its available generation capacity and cut back on unplanned power outages, crediting improved maintenance for the progress. As of 29 October 2025, the country had gone 167 consecutive days without load-shedding, marking a stark turnaround from years of instability in the national grid.
“Eskom has increased its available generation capacity and reduced unplanned power cuts, reflecting improved maintenance,” Godongwana said.
A Return to Profitability
For the first time in a decade, Eskom reported a profit in the 2024/25 financial year. The utility’s stronger technical performance and fewer days of load-shedding were key contributors to the turnaround.
However, Godongwana cautioned that the improved financial outlook remains fragile, particularly as municipal debt to Eskom continues to escalate.
Municipal Arrears Surge Despite Relief Measures
According to the minister, arrears owed by municipalities rose from R55.3 billion to R94.6 billion in the year ending 31 March 2025 an increase of R39.3 billion despite an existing municipal debt-relief programmer introduced in 2023.
So far, 24 municipalities have qualified for a one-third debt write-off after maintaining regular payments for a year, while 21 others are keeping up with their obligations. Yet 47 municipalities remain in default, largely due to weak revenue collection, infrastructure decay, and poor credit control.
“This is the combined result of weak collections, excessive electricity and water losses due primarily to a lack of maintenance, and inadequate credit control,” Godongwana explained.
Distribution Agency Agreements to Curb Defaults
As an interim measure, government plans to implement Distribution Agency Agreements (DAAs) in defaulting municipalities. Under these agreements, Eskom will temporarily manage local electricity distribution, help set cost-reflective tariffs, and assist with revenue collection.
Municipalities participating in the programme will be expected to introduce cost-reflective pricing, rehabilitate aging infrastructure, and ring-fence electricity revenues. They must also ensure that grants such as the Municipal Infrastructure Grant are directed toward maintaining essential services.
Godongwana emphasized that the DAA model is designed to stabilize municipal cash flows and strengthen financial discipline, serving as a bridge toward long-term structural reform.
“The interim measure does not rule out stronger interventions where failures persist,” he warned.
Debt Relief and Structural Reforms
Government’s Eskom debt-relief plan, first announced in 2023, has been adjusted in light of the utility’s improved performance. The National Treasury has extended the support period to 2028/29, while trimming the total assistance from R254 billion to R230 billion.
New legislation introduced in September 2025 formalized these changes, marking a shift toward fiscal prudence as Eskom continues its operational recovery.
Godongwana noted that although the fiscal risk associated with Eskom has eased, the utility’s long-term stability will depend on continued reforms in both financial management and infrastructure maintenance.
Transmission and Private-Sector Involvement
Meanwhile, the National Transmission Company of South Africa is finalizing market rules for a competitive wholesale electricity market a step the minister said is essential to ensure fair pricing and efficiency.
Plans are also underway to begin private-sector participation in transmission projects, though ongoing grid constraints and delays in connecting new generation capacity remain barriers to faster progress.
A Path Toward Stability
Eskom’s return to profitability and the ongoing 167-day streak without load-shedding signal a cautiously optimistic chapter in South Africa’s energy landscape. Yet the warning is clear: without addressing municipal debt and ensuring consistent governance, the hard-won gains could prove temporary
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