Nelson Mandela Bay Business Chamber wants Eskom takeover

Business leaders in Gqeberha are calling for Eskom to take over power distribution in the area from the Nelson Mandela Bay Metropolitan Municipality, which they say is technically and financially on the road to disaster.

Through this, they hope to prevent the collapse of an innovative agreement they entered into to buy renewable energy from solar and wind farms.

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However, the metro council refuses to consider the move, asserting its constitutional right to distribute electricity.

Council spokesperson Sithembiso Soyaya says there are no council resolutions, negotiations, or formal talks underway to relinquish power distribution, and the council is not considering transferring the function to Eskom or anyone else.

During a public hearing regarding new rules for electricity trading by regulator Nersa, the Nelson Mandela Bay Business Chamber requested a Distribution Agency Agreement (DAA) between the metro and Eskom, similar to those already in effect in three other municipalities across the country.

How it would work

Under such an agreement, the municipality retains its distribution licence, but Eskom is appointed as an agent to manage the function on their behalf.

Eskom typically bears the responsibility for metering, billing, and collections.

Revenue from electricity sales goes into Eskom’s bank account. It is ring-fenced to cover the municipality’s costs and arrears, and any surplus is paid out to the municipality.

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Eskom also takes over the management and maintenance of the distribution network.

The utility already has such agreements with Maluti-a-Phofung (Harrismith, Free State), Emfuleni (Vanderbijlpark, Gauteng), and Merafong (Carletonville, Gauteng).

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Eskom has indicated that it is in advanced negotiations for similar agreements with 13 other municipalities whose bulk accounts are in arrears, aiming to prevent outstanding debts from skyrocketing further.

Industry protecting itself

David Mertens, a director of the Business Chamber, explained during the hearing that labour-intensive manufacturers require reliable and affordable power supply to remain operational and maintain jobs. Access to electricity trading and wheeling is essential for this.

Under the Chamber’s leadership, several businesses in Nelson Mandela Bay – an SA automotive manufacturing hub – entered into an agreement with energy trader Etana for solar and wind generated electricity supply.

These plants are currently under construction and are expected to start supplying power before the end of the year.

This was only possible because Nelson Mandela Bay became the first municipality to allow electricity trading in 2011, marking South Africa’s first transaction involving multiple end-users, including industries.

Read: When an IPP, electricity trader and 20 business owners join forces …

For the first time, this gave smaller businesses access to renewable energy even though individually their demand is not enough to absorb the full production of a solar or wind farm, or they could not commit to long-term contracts of up to 20 years.

The trader made this possible by assuming some of the risk.

However, the entire plan could fail if the municipal power distribution collapses financially or technically. According to Mertens, this is currently the case.

While Nelson Mandela Bay was a pioneer in 2011, Mertens says it can no longer distribute power sustainably today, and there is no plan to get back on track.

“It deteriorates year after year. In 2024/25, there was a loss of R1.4 billion, and in the current financial year, it is projected at R1.7 billion. The council is on track to default on its obligations to Eskom but refuses support from Eskom.”

In 2024/25, the council’s electricity losses amounted to 27%, and the infrastructure is becoming increasingly unstable, according to Mertens.

Flouting of licence rules

Mertens points out that Nelson Mandela Bay is committing major contraventions of the technical and financial conditions of its distribution licence but “Nersa refuses to act in line with its legal mandate to address non-compliances with license conditions”.

The result is that customers are losing confidence in the metro council, and industries are withdrawing or shutting down.

“High costs, poor supply, and uncertainty are key contributors,” he says.

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Against this backdrop, Mertens believes further investment in independent power generation linked to Nelson Mandela Bay is unlikely. “Will we be able to wheel in a failing municipality? No!”

The unavoidable result is discriminatory access to trading and wheeling.

Problem not localised

The problem extends far beyond Nelson Mandela Bay. Mertens indicates that to ensure an open electricity market, Nersa must address South Africa’s “catastrophic” municipal electricity distribution.

He is critical of the draft rules for electricity trading, as they are silent on this issue.

“Nersa ignores major violations in the distribution space but proposes a set of additional rules.”

He recommends that Nersa enforce existing distribution licence conditions and take steps to transfer licences from failing distributors into capable hands.

“For Nelson Mandela Bay, Nersa must, for example, enable a DAA with Eskom.”

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