Free State electricity’s impenetrable darkness

By Niki Moore 6 October 2014

On Wednesday last week, power utility Eskom issued a rather uncompromising statement: because of persistent non-payment, the Free State municipalities of Maluti-a-Phofung (Harrismith, Qwa Qwa, Kestell), Ngwathe (Parys, Heilbron) and Dihlabeng (Bethlehem) would be cut off at noon on Friday. Soon for the chop would be the Matjhabeng (Welkom) municipality, with an outstanding electricity bill of more than R300 million. The statement announced that the overall arrears were now so great (R736 million as of 30 September) that the utility had no choice. Over one weekend, therefore, almost a third of the Free State was going to be plunged into the dark. By NIKI MOORE.

The effect on the local economies would be catastrophic. And this was not the first warning – for most of these municipalities the non-payment problems have stretched back to 2009, with regular threats every few months, usually averted at the last minute.

For ratepayers, these threatened cut-offs are a particularly sore point. Every month they dutifully pay their service charges, only to see the money being spent on festivals, parties, luxury vehicles, overseas junkets, inflated tenders and staff salaries – not to mention the constant reports of theft and corruption. Appeals for national intervention to avert a disaster has fallen on deaf ears. The crisis has now arrived, and it is high noon for these four non-performing municipalities.

This ongoing problem has three elements. Firstly, payments for services are not ring-fenced by municipalities, but rather go into the municipal pot where the priority is to pay salaries and council running costs.

“There is money coming in,” insists Analeze de Witt, a ratepayer in Kestell. “But it is not used to pay for electricity. It should be put to one side and used to pay bills, but it isn’t.”

“In Bethlehem,” says ratepayer association chair Danie Eichstadt, “the arrears ballooned from R30 million to R80 million in four months. No-one could understand why the debt went up so quickly. The municipality offered to pay Eskom on terms, but the amount they would pay would hardly cover their running account, let alone the arrears.”

The second problem is that in the townships, pre-paid meters and light poles are jemmied so that people can steal electricity freely – it has become a common cottage industry (Eskom calls it, coyly, ‘technical loss’). But the municipalities dare not disconnect non-paying or illegal connections in the townships: if they did, there would be an uprising. According to NERSA figures, 45% of electricity in Ngwathe municipality, as an example, is stolen.

“The culture of non-payment is so pervasive,” says Eichstadt, “that even people who can pay, don’t pay. They reason that they have never paid for electricity, so why should they start now. And even businesses are joining in, saying that why should they pay when no-one else does.”

The third problem is that municipal administration is in disarray, with chaotic billing processes, under-reporting of indigents, non-adherence to budget procedures, and arbitrary pricing. This results in a poor cost recovery, as people have legitimate disputes with the municipality that require court cases to resolve.

And then there is the issue of politics. Maluti-a-Phofung Municipality (Harrismith, Qwa Qwa and Kestell) decided to follow the example of the Mafube municipality and outsource their electricity. Municipal manager Madala Ntombela admitted that the municipality was simply not able to deliver electricity to its residents. Their bill to Eskom by August 2013 was R200 million and climbing. So they signed a service agreement with Rural Maintenance (Pty Ltd) to take over the service contract for 25 years. Rural would deliver electricity at no expense to the municipality, while paying them a royalty. Within months, Rural had paid Eskom’s account every month to the tune of more than R140 million, invested R173 million in infrastructure, resolved more than 14,000 complaints, and created 105 new jobs.

But this caused ructions in council. The executive mayor, Sarah Moleleki, with the support of the provincial government, said the appointment of the service provider was unprocedural. She did not want to outsource electricity supply and rather wanted to empower the municipality to do the job. The Municipal Manager argued that the municipality simply did not have the capacity to do this. The dispute landed up in court. In the meantime, the municipality was not paying its own electricity bill, which by April 2014 amounted to R32,6 million. The council was also instructing people not to pay their accounts.

Rural Maintenance (Pty Ltd) cancelled the contract after less than a year, citing chronic non-co-operation from the municipality. They are sadly missed by the residents of Maluti-a-Phofung, who say that while Rural Maintenance was in charge, things had actually worked.

In Welkom, Matjhabeng Ratepayers Association president Evyn Thorne was warning as far back as April 2013 that Welkom was heading for a blackout. At that stage already the city owed Eskom R239,7 million.

“The city defied the court order instructing them to pay Eskom,” he said in a statement. “Without electricity there will be no petrol to run generators, banks will not be able to operate, businesses will have to close their doors, security of property and assets will be compromised or non-existent – a cataclysmic scenario will unfold.”

“The widespread wastefulness of the City Council only serves to aggravate matters,” agreed Ratepayers Association member Aubrey Nysschen. “The economic momentum of Matjhabeng is reaching its end with the closure of mines. People and businesses are leaving Matjhabeng in droves. Eleven major firms have already closed their doors, pushing up our already high employment figures of 37% of the total population, and 49,7% of the youth.”

The ratepayers of Matjhabeng want to take over their own electricity supply and pay directly to service providers, cutting out the municipality who, they say, simply don’t know how to handle money.

On Friday, hours before the scheduled Eskom province-wide cut-off, Afriforum and the DA along with sixteen other respondents filed an urgent application in the High Court to prevent the disconnection. Their argument was that a disconnection was not fair on the people who paid, and further that cutting off power to townships (whether they were paying or not) incurred the risk of widespread violent protests.

The court ruled that Eskom could not cut off power to paying customers, and should rather recover their money from municipalities by some other means. There is breathing space until December this year, but it is unlikely that without some drastic intervention, anything can change.

“This problem has been going on for years,” says Cornelius Els, the Free State provincial co-ordinator for Afriforum. “Money is not ring-fenced for payment. Also, people in the townships exceed their free allowance, or they steal electricity. The municipalities then try to recover these losses through very big increases. Often, these are illegal. Just before the elections, the municipalities admitted that they could not cut off the electricity because, as they said, “the townships will burn”. And they were worried it would hurt them at the polls. Frankly, they are on a hiding to nothing. In some cases the arrears are bigger than their annual budget. They will never be able to pay.”

“We took this case to court,” he continues, “even though we are on the side of Eskom. One cannot penalise Eskom when they are simply acting to recover their money. But we also cannot penalise their paying customers. We have to find a way to resolve this: we can’t go running to the courts every few months to prevent Eskom from cutting off power because the municipalities can’t manage their money.”

The biggest irony, which incenses ratepayers and business people, is that these towns are regularly featured in the news for massive corruption and wasteful spending. In 2011, Matjhabeng Municipality was exposed by the Sunday Times for wasting R2 billion.

In Ngwathe that same year the mayor was promoted despite being investigated for corruption.

In 2013, the municipal workers’ union SAMWU in Parys demanded the resignation of the municipal manager after he was found guilty of corruption and nepotism.

In February 2012 SAMWU issued a very strong statement requesting ‘blatant’ corruption in the Free State to be dealt with.

It is astounding, say ratepayers and business people alike, that all these cases are exposed in the press or by whistleblowers and yet nothing happens to the perpetrators.

“When the Premier took over in 2009,” says Free State DA MPL Roy Jankielsohn, “he promised to prioritise governance problems in the Free State. Ever since then, the Free State has dropped in governance ranking from 4th to 9th. We now have the highest unemployment rate in the country. The Premier brags that he is paying social grants to almost a million people: I don’t think one should brag about that, it is an indication of political and social decline. We all know our social grant system is unsustainable.”

Numerous attempts were made to find out from the defaulting municipalities how they intended to pay their arrears to avoid further threats of disconnection. Only one municipality has a spokesman (Matjhabeng), and he was not answering his phone. The switchboards at the other municipalities rang all afternoon on Friday, unanswered. The lights might have been on, but nobody was home. DM


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