Increasing free electricity allowance won’t help if municipalities don’t deliver

Minister Kgosientsho Ramokgopa’s proposal to raise the free electricity allowance cannot fix a broken distribution system where non-compliant municipalities routinely divert relief funds to pay staff instead of delivering power to indigent families.

Michael Cherry retired recently as a professor of zoology at Stellenbosch University. From 1989 to 2015, he was a contributing South African correspondent for the international science journal Nature, and from 2009 to 2012 he was editor-in-chief of the South African Journal of Science.

Over the past two months, intense debate surrounded the Local Government Equitable Share after Finance Minister Enoch Godongwana withheld R13.5-billio n in funding from 69 delinquent municipalities in early July.

The funds – which targeted cities including Johannesburg, Nelson Mandela Bay, Buffalo City and Mangaung – were subject to proof of proper financial compliance. However, despite only 20 municipalities (and just one metro, Buffalo City) meeting these standards, the Treasury reinstated the full tranche on July 31.

The immediate problem is this: Between them, the 69 municipalities owed R27-billion to Eskom, the water boards and their employees’ pension funds. The reason they are unable to pay is that they, in turn, are owed R219-billion by households, businesses and government departments that have not paid their own municipal bills. Of this sum, R12-billion – just over 5% – is owed by government departments and parastatals.

The underlying problem is partly related to mismanagement by municipalities. But it is also related to mismanagement at Eskom, which has resulted in electricity becoming prohibitively expensive for households and industry. Over the past 20 years, the price of electricity has increased sixfold in real (inflation-adjusted) terms.

Electricity and Energy Minister Kgosientsho Ramokgopa acknowledges the issue, yet puzzlingly opposes unbundling Eskom to create an independent transmission entity. Creating this separate entity remains the most viable long-term solution to expand access to cheaper renewable energy.

What can be done in the meantime to minimise the impact of this cost, particularly on the poor? Ramokgopa said last week that the government’s new policy, due for release last Friday, will raise the amount of free basic electricity (currently 50 kilowatt-hours per month) to between 200 and 300kWh.

While this would be welcome, it would not solve the main problem: 11.2 million (56%) of South African households qualify for free basic services (including electricity), but only one-quarter receive them .

Every household with a combined income of less than R4,800 per month (equal to two state old-age grants) is entitled to receive monthly free water (six kilolitres), energy (50kWh), sanitation and refuse removal (based on service levels defined by national policy). The central government allocates funds to municipalities to pay for this, plus 10% for the maintenance of infrastructure that provides these services.

To this end, the state allocates R648 per month on behalf of each indigent household through the municipality in which it is located.