Time to pay up: a look at municipal debt
More than R161-billion owed for electricity, water and taxes
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Earlier this week, we reported on Kai !Garib Municipality in the Northern Cape, home to about 85,000 people. It is more than R1-billion in debt, most of it owed to Eskom. Its annual revenue in 2025 was less than R400-million. That is not enough to deliver essential services, let alone pay off its debt.
The municipality is unable to provide clean water or treat wastewater, and its roads are riddled with potholes.
The situation in Kai !Garib is not unique. Only 18 of the country’s 213 municipalities have no debt at all. According to the National Treasury, municipalities owed more than R161-billion in December 2025.
Eskom was owed R110.5-billion, while regional water boards and the Department of Water and Sanitation were owed R30.7-billion. SARS was owed R601-million, and the Auditor General R908-million.
Almost a third of municipal debt belongs to just four municipalities, which each owe more than R10-billion. They are: Matjhabeng (Free State), Emfuleni (Gauteng), Emalahleni (Mpumulanga) and the City of Johannesburg (Gauteng). Together they owe more than R50-billion.
What is the plan?
Recently, National Treasury withheld R13.5-billion in equitable share grants (the portion of national revenue that municipalities receive) to 69 municipalities that had passed unfunded budgets, failed to spend correctly, and had not met their obligations to Eskom, water boards, SARS, the Auditor-General and pension funds.
These municipalities collectively owe R27.4-billion. Ten of them account for nearly 80% of the debt. One of the conditions set by Treasury for the grants to be unfrozen is that the municipalities sign repayment agreements with their creditors.
One of the biggest reasons municipalities owe so much to Eskom is that they struggle to take in revenue for electricity used – billing systems are dysfunctional and illegal connections are rife. This means revenue has not been high enough to pay Eskom and repay the debt.
The National Treasury launched an Eskom debt relief programme in 2023. The idea was that municipalities’ debt would be written off over three years, as long as they met strict conditions, including paying their monthly electricity accounts and increasing their revenue collection through proper billing.
While some municipalities have benefited from it, more than 61 out of the 71 municipalities that signed up for the programme have failed to meet the conditions. “Persistent defaulters” are being removed from the programme.
Another way municipalities can reduce their electricity debt is by signing an agreement with Eskom that gives Eskom control over billing and revenue collection.
National Treasury has also started a new conditional grant to help municipalities roll out smart prepaid meters.
For water debt, there is a programme run by the Department of Water and Sanitation that writes off debt over three months provided that new invoices are paid throughout: if a year’s invoices are paid consistently, a third of the debt is written off.
Outside of this scheme, municipalities can also sign negotiated repayment agreements with water boards.
At the same time as repaying their debt, municipalities need to stop water losses caused by leaks and illegal connections.
There are also other ways provincial and national governments can intervene in dysfunctional municipalities, such as placing them under administration, but the track record is poor.
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© 2026 GroundUp. This article is published under the GroundUp Republication Licence Version 1.0. Email [email protected] to request permission to republish.