SAMWU Rejects Eskom DAAs: Demands Halt, Worker Protection

• SAMWU strongly rejects Eskom's Distribution Agency Agreements (DAAs), demanding a review and protection for municipal workers from retrenchment or altered conditions.
• AfriForum has launched a court application to declare the Eskom-Merafong DAA unlawful, citing a failure to follow legal processes and warning of dangerous precedents.
• The South African Local Government Association (SALGA) is part of a working group with National Treasury and Eskom to standardise DAAs, which Treasury previously deemed one-sided.
• Eskom's DAAs involve the utility taking over electricity distribution in indebted municipalities, with consumer payments going directly to Eskom, against a backdrop of R119 billion in municipal debt.
• Fourteen municipalities face a September 1st deadline to conclude DAAs, with non-compliance risking electricity cut-offs, bank account attachments, and exclusion from National Treasury grants.

Allowing unlawful processes to take root undermines the rule of law and opens the door to further governance failures.

The South African Municipal Workers' Union (SAMWU) has voiced strong opposition to Eskom's increasing involvement in municipal electricity distribution, specifically rejecting the methods employed to implement Distribution Agency Agreements (DAAs). The union is calling for an immediate halt to the enforcement of existing DAAs and demands that any attempts to link municipal equitable share allocations, grants, or debt-relief programs to these agreements be suspended. SAMWU insists that all current DAAs undergo a comprehensive review, ensuring the full participation of organised labour, municipal councils, and affected communities.

Central to SAMWU's concerns are the implications for municipal workers. The union explicitly states that no employee should face retrenchment, transfer, or secondment, nor should their duties or conditions of service be altered, without proper consultation and collective bargaining. DAAs typically involve the secondment of municipal employees performing electricity functions to Eskom, while these individuals technically remain employees of the municipality. However, the agreements also permit Eskom to appoint its own staff, consultants, or contractors to perform these same municipal electricity functions, a provision SAMWU fears will create significant uncertainty for workers and progressively diminish municipal capacity.

SAMWU is deeply troubled by the growing trend of presenting DAAs as the sole viable solution for municipalities grappling with financial distress and substantial historical debt to Eskom. This approach, they argue, overlooks broader systemic issues and places undue burden on local government structures and their employees. The union's stance highlights a critical point of contention between national utility strategies and local government autonomy and labour rights in South Africa.

The legality and implementation of Distribution Agency Agreements are facing increasing scrutiny, notably through a court application launched by AfriForum. This civil rights organisation is challenging the agreement between Eskom and the Merafong Municipality in Carletonville, seeking to have it declared unlawful and invalid. AfriForum contends that the necessary legal processes were not adhered to during the agreement's formation, arguing for its complete annulment.

Morné Mostert, AfriForum's head of municipal affairs, has issued a stark warning regarding attempts by Eskom and National Treasury to compel municipalities into DAA arrangements without following the prescribed legislative framework. He cautioned that such actions could establish a dangerous precedent, asserting that "Allowing unlawful processes to take root undermines the rule of law and opens the door to further governance failures." This sentiment underscores a broader concern about the integrity of governance and adherence to legal protocols in the rollout of these agreements.

The South African Local Government Association (SALGA) has also expressed reservations about the DAAs. SALGA is actively participating in a working group alongside National Treasury, Eskom, and the Departments of Electricity and Energy, as well as Cooperative Governance and Traditional Affairs. The primary objective of this group is to standardise the content of these agreements, which National Treasury had previously characterised as disproportionately favouring Eskom. Despite these ongoing efforts to achieve standardisation, Eskom recently proceeded to finalise its agreement with the Ditsobotla municipality, indicating a divergence in approaches even as discussions continue.

Distribution Agency Agreements represent a strategic mechanism for Eskom to address the substantial financial liabilities owed by municipalities. Under these agreements, Eskom assumes full responsibility for the electricity distribution function within a municipality that has accrued significant debt to the utility. In return for this service, Eskom charges a fee. A key operational change under a DAA is that consumers' electricity payments are made directly to Eskom. The utility then retains the necessary funds to cover bulk purchases and other operational costs within the municipality, remitting any remaining balance to the local authority.

Currently, four municipalities have entered into such agreements with Eskom: Maluti-a-Phofung, Emfuleni, Merafong, and Ditsobotla. The implementation of these DAAs is set against a backdrop of escalating municipal electricity debt, which has now reached a staggering combined total of R119 billion. This immense debt is widely regarded as the most significant threat to Eskom's financial sustainability, prompting the utility and National Treasury to seek solutions like the DAAs. National Treasury has previously indicated that as many as 30 municipalities have been identified as potential candidates for these agreements, highlighting the scale of the financial challenge.

A critical deadline looms for 14 municipalities that were instructed by National Treasury in March to finalise Distribution Agency Agreements with Eskom. These municipalities must conclude their DAAs by September 1st, or face severe repercussions. Failure to meet this deadline could result in Eskom implementing drastic credit-control measures, including the potential cut-off of electricity supply to the non-compliant municipalities. Furthermore, Eskom may pursue other enforcement actions, such as attaching the bank accounts of these local authorities.

Beyond direct actions from Eskom, municipalities that fail to comply with the September 1st deadline also risk being excluded from crucial assistance and grants provided by National Treasury. This dual threat underscores the significant pressure on these 14 municipalities to formalise their agreements. The directive from National Treasury highlights the government's determination to address the pervasive issue of municipal electricity debt and ensure Eskom's financial viability, even as legal and labour challenges to the DAA framework persist.

Lawyers advising municipalities or Eskom on Distribution Agency Agreements (DAAs) must be aware of the mounting legal challenges and union opposition regarding their legality and implementation, particularly concerning legislative compliance and municipal worker implications. Compliance officers in affected municipalities should closely monitor these developments, especially given the September 1st deadline for concluding DAAs to avoid penalties.

Source: Information from recent reports.