Jaspreet Kindra
Eskom is battling under a mound of more than R1-billion in unpaid electricity bills, with Soweto alone accounting for R670-million of this.
Municipalities, which also supply electricity to ratepayers, are also facing a financial crunch because of non-payment.
The total debt owed to municipalities across the country is believed to be R500-million. The KwaZulu-Natal town of Nongoma faced a power shut-down this week because of unpaid bills amounting to R6,4-million, according to Eskom.
Eskom and local authorities are increasingly caught between the need to raise revenue, in part for development purposes, and consumer militancy.
Threatened Eskom cut-offs sparked a protest march to the home of Pimville ward councillor George Ndlovu on Monday. The marchers, riled by warnings that arrears had to be paid within 14 days on pain of disconnection, accused Eskom of incompetence and indiscriminate behaviour.
Soweto Electricity Crisis Committee representative Dudu Mphenyeke cited a university study showing the utility was cutting off 20 000 people a month, and claimed this was in preparation for privatisation.
On the East Rand, a political row erupted over the Ekurhuleni Metro’s alleged refusal to apply credit-control measures in Tembisa. Democratic Alliance representative Lana Marais said mayor Bavumile Vilakazi’s refusal to cut off electricity defaulters was in defiance of national and provincial government instructions.
Eskom’s Clarence Kwinana says unpaid debts to the utility over the past 90 days stand at R1,2-billion nationwide. “It is not sustainable for people to receive a service and not pay for it,” he says, adding that non-payment will undermine Eskom’s development programmes, including electricity roll-out. At the time of the 1996 census more than 40% of South African households were without electricity for lighting, and more than 50% for cooking and heating.
Financial managers in several municipalities also raise concerns over the adverse impact of non-payment on the provision of basic services to the “poorest of the poor”.
Councils face a number of additional burdens, including the requirement that they supply six kilowatts of power free to all households in terms of an African National Congress local government election pledge. Few councils, including metro councils, are thought to have implemented this.
A little-noticed change to the Municipal Structures Act last year transferred responsibility for power, water, health and sanitation provision to district councils, threatening the major revenue sources of local councils mainly secondary towns.
Seen as the brainchild of Demarcation Board chief Michael Sutcliffe, this is known to have hit fierce objections from the Department of Finance, on the grounds that it would undermine important urban economies. Implementation has been delayed by Minister of Provincial and Local Government Sydney Mufamadi.
In the longer term, government’s plan announced by Minister of Minerals and Energy Affairs Phumzile Mlambo-Ngcuka last year is to transfer power distribution to six regional electricity distributors (Reds), to enhance efficiency.
But councils are deeply concerned about the potential impact of the proposed changes. One effect of depriving municipalities of the right to distribute power is that they will lose a broader credit-control measure. Many councils send out consolidated bills that include charges for electricity, water and rates, enabling them to use power cut-offs to collect other debts.
Municipalities where Eskom supplies consumers directly are already suffering. Says Mandeni’s acting manager Rodger Ferguson, whose local authority is battling with a R20-million debt: “If we were supplying electricity, we could have used it as an effective credit control tool to recover our money.”
Philip van Ryneveld, former chief finance officer of the Cape Town Metro, highlights yet another danger if municipalities lose control of distribution a hike in rates.
“The removal of electricity from local authority will not result in an equivalent reduction in support service costs to the local authority,” Van Ryneveld points out. “Unless compensated for, some of the burden will be shifted to rates and other income.”
The Western Cape has threatened court action over the constitutionality of handing a municipal function to a regional body.
The chief director of electricity in the minerals and energy department, Nelisiwe Magubane, says the government is moving to ensure municipalities do not suffer as a consequence of restructuring.
The Red Establishment Bill, which will set the legislative framework for regional distributors, provides for municipalities to become shareholders in these bodies and entitles them to a share of any profits they make. The Bill is expected to be tabled in Parliament in November.
Two years ago the local government department proposed the establishment of registers of “indigents” those genuinely unable to pay for services in each local authority. These would make it possible to target poor households for subsidies from the central government allocation to councils, while cracking down on freeloaders.
The system does not appear to be widely in force.
Van Ryneveld’s suggests that pre-payment systems may offer a solution to the seemingly intractable problem of unpaid power bills.
He says some electricity pre-payment systems permit the charge to be set differently for different meters. In Cape Town, those consistently running into arrears on credit meters are given pre-payment meters and charged an additional 14% a unit until their debt is paid off.
Durban Metro’s executive director of finance Krish Kumar says credit control methods, such as 30 days’ warning before disconnection, have helped raise the revenue recovery rate to 97%.