Soweto’s unpaid bills add to Eskom’s financial woes

Zodwa Madiba has not paid an electricity bill in 14 years and is resolute she never will, holding the ANC to the vague promises it made in the dying days of apartheid to provide free electricity to all South Africans.

Such defiance is widespread in the sprawling township of Soweto, crucible of the anti-apartheid struggle and home to 1.5-million people who, between them, owe state power utility Eskom R3.6-billion in unpaid bills.

Although the sum is dwarfed by the R225-billion revenue shortfall Eskom says it faces over the next four to five years, it is important symbolically as the utility battles to raise money for new power stations needed to keep the lights on.

Eskom generates almost all the electricity in South Africa and nearly half that produced in sub-Saharan Africa. The energy regulator sets prices, but Eskom says it costs more to produce electricity than what South Africans pay for it.

Given Soweto’s history of militant activism since the 1960s, such as burning barricades, school boycotts and a systemic refusal to pay utility bills, locals are unlikely ever to pay up, setting a disturbing example for the rest of the country.

‘Free electricity for all’
Soweto owes more for electricity than the rest of the country put together, which owes arrears of R2.6-billion.

“If you remember, when this government entered they said ‘Free electricity for all’. Tell me, what does that mean?” asked Madiba, a 57-year-old community activist and member of the Soweto Electricity Crisis Committee (Secc).

Secc was founded to counter the government’s refusal to deliver free or affordable electricity and the group says Sowetans continue to suffer from poverty and joblessness 20 years into democracy.

“At that time, people were fighting apartheid, so they didn’t pay. Now, they just don’t have money. Young, old and middle-aged, there are no jobs. People are depending on grants from their granny,” said Madiba.

Millions of South Africans have escaped poverty under the ANC through social welfare, but the grants are weighing on government finances, especially as the economy stalls and one in four people remains without work.

Eskom is in something of a vicious cycle: without economic growth, powered by electricity, there will not be enough tax money for sustained social spending and to invest in infrastructure, including power generation.

Illegal connections
With Eskom in financial trouble, the government says all South Africans should do their bit. This message is widely rejected in Soweto, where Secc on a regular basis illegally reconnects those whose power has been cut off.

The utility says it has a plan to improve debt collection and get customers paying, but declined to comment on Soweto’s history of institutionalised delinquency.

Ten years ago it was forced to write off R1.4-billion in debts owed by Sowetans, creating the impression for residents that they can get away with it.

“That’s the bed Eskom made and they are starting to sleep in it. I don’t know what else you can actually do,” said economist Chris Hart from Johannesburg consultancy Investment Solutions.

“People need to be paying for those services. It’s really as simple as that.”

Eskom’s bad debts rose to 1.1% of revenue in 2013-2014 from 0.82% the previous year, suggesting that its billing plans have some way to go and emphasising the need for alternative funding.

The government is injecting an extra R20-billion into the utility and may convert a R60-billion loan into equity, but other funding options are narrowing fast. Ratings agency Moody’s cut Eskom’s credit rating to junk two weeks ago.

“Eskom is not in a comfortable space because the credit rating agencies are looking at this and seeing there are multiple challenges at all levels,” said Hart. – Reuters

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