Merafong: Eskom and the Merafong City Local Municipality have concluded the official signing of a Distribution Agency Agreement (DAA). The municipality has become the third local authority in the country to enter into a DAA with the power utility following Maluti-a-Phofung in the Free State and Emfuleni, in Gauteng.
According to South African Government News Agency, the agreement forms a key part of Merafong City's broader turnaround strategy aimed at stabilizing electricity infrastructure, improving financial management, rebuilding public trust, and supporting local economic development. Merafong City entered into this agreement which represents a strategic and transitional intervention designed to stabilize electricity distribution, strengthen governance, and improve revenue collection while ensuring consistent and reliable power supply for residents and businesses, the municipality and Eskom said in a joint statement.
The agreement outlines that electricity distribution and certain retail functions will be jointly managed in a structured framework. Billing and revenue collection will be ring-fenced and administered through Eskom systems. Merafong will remain the electricity license holder, with Eskom providing technical expertise, operational support, and skills transfer. Free basic electricity will be disbursed directly by Eskom to qualifying indigent households. Long-term structural reforms will continue through National Treasury to support municipal fiscal sustainability.
Furthermore, the DAA introduces improvements to strengthen the resilience and accountability of the municipality's electricity distribution system. It includes strengthened operational coordination between Eskom and the Municipality, improved maintenance processes and fault-response times, enhanced infrastructure planning and investment readiness, clearer responsibilities, reporting lines, and accountability mechanisms, greater reliability and predictability of electricity supply, protection of existing jobs, and structured training for municipal employees, and capacity-building and skills transfer to support long-term municipal sustainability.
Municipal manager, Dumisani Mabuza, stated that the agreement represents a shared commitment to strengthening the electricity network, enhancing technical support, and ensuring that residents receive stable and reliable services. Eskom acting Group Executive for Distribution, Agnes Mlambo, described the DAA as a critical step towards enabling the municipality to stabilize electricity provision for citizens.
In the Medium Term Budget Policy Statement, National Treasury explained that DAAs are an interim measure to support municipalities that are battling to pay debt owed to Eskom. Municipalities owe the power utility some R94 billion as at the end of March this year. Under these agreements, Eskom will operate municipal electricity services for a defined period, support cost-reflective tariff setting and loss reduction, and assist with collections. During this period, municipalities will be required to select the most appropriate service delivery mechanism, phase in cost-reflective tariffs and limit rebates. The DAA pathway is intended to stabilize cash flows, improve payment discipline, and create a bridge to longer-term structural reforms in the local government fiscal framework. The interim measure does not rule out stronger interventions where failures persist, National Treasury said.