AfriForum questions legality of Merafong’s electricity agreement with Eskom

AfriForum has issued a formal letter of demand to the Merafong Local Municipality requesting an explanation regarding some of the alleged procedural irregularities underpinning the signing of the Distribution Agency Agreement (DAA) with Eskom at the end of 2025. The civil rights organisation questions whether this agreement, which was apparently signed without proper public participation, fully complies with the applicable legislative requirements.

AfriForum has therefore demanded that the Municipality provide proof that all statutory requirements have been met, including public notices, feasibility studies, council resolutions and the necessary approvals from the National Treasury and the National Energy Regulator of South Africa (NERSA).

According to the agreement, which was signed in December 2025, Eskom is appointed as an external service provider to perform functions relating to electricity distribution on behalf of the Municipality. Consumers must therefore pay Eskom for electricity in terms of the agreement, instead of the Municipality.

AfriForum warns that agreements of this nature, if concluded outside the strict confines of the law, risk enabling Eskom to gain control over municipal electricity distribution without the necessary regulatory oversight. While sustainable solutions to municipal debt are necessary, it cannot come at the expense of legality, transparency and constitutional accountability.

This agreement follows National Treasury’s Municipal Debt Relief Programme introduced in 2023, which created a framework for municipalities whose electricity accounts are in arrears. In terms of this framework, municipalities that failed to comply with the conditions of the debt relief arrangement were required to apply to NERSA to voluntarily revoke their electricity distribution licences.

In May 2025, AfriForum wrote to NERSA requesting confirmation as to whether any of the municipalities involved – including the Merafong Municipality – had applied for the revocation of their licences. To date, NERSA has not responded to this request.

AfriForum argues that instead of following a transparent licence revocation process, the Municipality proceeded to conclude a DAA with Eskom. AfriForum states in its letter that this may amount to the effective transfer of electricity distribution functions without compliance with Section 78 of the Municipal Systems Act, which requires public participation, an assessment of service delivery options and a feasibility study before appointing an external service provider. The Electricity Regulation Act further prohibits a licensee from transferring or assigning its powers without NERSA’s prior written consent.

“AfriForum realises that electricity debt to Eskom is excessive and that many municipalities no longer have the capacity to maintain electricity networks or properly manage revenue collection. Alternative solutions must be found, and a DAA may be one of them. The Minister of Finance even recently encouraged municipalities to enter into similar agreements with Eskom. However, it is crucial that these agreements comply with the necessary legislation,” says Deidre Steffens, Advisor for Local Government Affairs at AfriForum.