Defend Truth


New Cape Town electricity tariffs reinforce segregation in a hyped-up property market


Marianne Merten has written on Parliament since 2016 for Daily Maverick. The intersection of governance, policy and politics unfolds at many levels, from tiny nuggets of information hidden in the voluminous stacks of papers tabled at the national legislature to the odd temper tantrum by a politician. Sometimes frustrating, sometimes baffling, even after 26 years as a hack, there are few dull days in the parliamentary corridors.

From one day to the next my electricity costs doubled. My household is one of the reportedly 44,000 that the Cape Town City Council forcibly migrated from the (cheaper) lifeline to the domestic tariff by introducing a R400,000 property value qualifying threshold. Those like middle-class moi can absorb the cost. But others? In Cape Town, where house and apartment prices and rentals rampage ever higher, the new electricity cost structure throws up yet another barrier to affordable housing near employment and education in central Cape Town and surrounds, in a city with a reputation for being lily-white and segregated.

Up until 1 July, 2017, due to my average monthly consumption of around 200 units of prepaid power despite living in properties well above R400,000 within the Cape Town City Bowl and surrounding areas, I had benefited from the lifeline tariff, and paid R200 a month for power. It was possible because there’s a gas stove and heating, energy efficient light bulbs and appliances and a geyser switched on only overnight to produce warm showers in the morning.

The Eskom supply disasters of recent years – never mind the dodgy dealings now emerging in the #GuptaLeaks and the R3-billion in payments unsupported by any documentation arising in its 2017 financials – have impacted on local governments. Councils raise significant portions of their revenue from rates electricity tariffs alongside those for water and sewage. That potential has been squeezed not only be a reduction in demand, but also Eskom’s regular way above inflation electricity hikes since the 2009/2010 financial year, most recently accompanied by dire warnings of a return to load shedding if the hikes are not allowed.

And so Cape Town restructured its electricity tariffs, as it also did away with free water allowances even for the poorest of households, in support of revenue-raising for its R44-billion budget for 2017/18. But in bringing about these changes Cape Town’s city bosses have wielded a blunt axe.

By setting the lifeline electricity tariff threshold at property values of R400,000, it effectively lumps together those residing in R400,001 properties with the R10-million, R15-million, R25-million and pricier property owners along the Atlantic seaboard and plush mansion-dominated suburbs like Constantia and Bishopscourt or those in the gated luxury communities of the northern suburbs.

This means those already facing the obstacle of affordable housing – young professionals without the intergenerational wealth largely available to white families who can step in to pay a deposit or help out with the bills, working-class families and other low-income earners – now face added pressure in meeting monthly costs.

Moving to, or continuing to live in, the City Bowl and surrounds to be close to work and education opportunities involves very blunt calculations: it costs between R134 and R228 depending on distance for a monthly train ticket, but significantly more for electricity. The R200 I spent per month are unusual I’m told, as monthly costs run to R850 to R1,200 even for a modest household of two in a rented apartment on the domestic tariff. [Note: unlike in, for example, Johannesburg, prepaid is prevalent in Cape Town, particularly in rental accommodation, as it allows landlords not to have to worry about bills for their account.]

The Cape Town City Council says its increases are limited to 2.8%, and that there would be no difference to consumers using over 600kiloWatt/per hour (kWh). That’s presumably the well-off with plenty of appliances, plenty of fittings to light up their multi-million homes, swimming pools and the like?

Instead it is those that remain on the lifeline tariff who are set to pay more, according to the city’s own website: lifeline units’ costs increased 5.06% between 61kWH and 350kWh, and lifeline customers using more than 350kWh, or block 2, pay the same as the domestic tariff users of more than 600kWh – 234.44 cents per kWh (c/kWh) including VAT.

There are other troubling numbers. According to the National Energy Regulator (Nersa) website, Cape Town has been approved for a lifeline tariff charge of 87.32 c/kWh up to 350kWh consumption, but the city’s website reflects charges of 102c/kWh, or 116.28c/kWh including VAT. And Nersa approval on the domestic tariff is for 149.67c/kWh for up to 600kWh monthly consumption, but the city says it’s charging 169.12c/kWh, or 192.9c/kWh inclusive of VAT.

That’s the tariff I now pay as one of the about 44,000 households moved by the city to the more expensive domestic tariff, according to Cape Town Magazine.

In duplicitous administration speak, the city council ticks the boxes of (meaningless) transparency. “Any customer on the Domestic Tariff, who feels that they’ve received less than the average of 450 kWh per month, and meets the additional criteria, is free to apply for the Lifeline Tariff. However, the City will investigate whether or not they actually do qualify or not. Should they qualify, they will be switched to the Lifeline Tariff with effect from the date of application,” says the city on its website.

It sounds all reasonable, doesn’t it? I know I use around 200 units a month but I am excluded because my property is worth more than R400,000, the central criterion of the new tariff structure. Okay, I don’t mind paying more for the privilege of being a homeowner, although I would like to see that money being used better to integrate the city that right now keeps its best bits for its white and rich residents, and tourists, while everyone else is treated like a sojourner.

But how many others of the 44,000 forcibly migrated are in the same boat, given our torrid economic environment? And how many of those in properties valued at R1-million will be able to pay the R8.21 daily charge, even before a unit of electricity is consumed, that looms from next year, having been postponed now?

A quick perusal of sales and rentals shows that even a 40-odd square metre abode will set a buyer back well over a million in most parts of the City Bowl. The working-class cottages of Woodstock and Salt River have become unaffordable to anyone without a dual professional income and the privileges, or is that entitlement, arising from the security of intergenerational wealth. Meanwhile, estate agents tout the working-class areas of Brooklyn and Maitland, slightly further from the city but still reasonably close, as the next gentrification zones with house prices rising well over R1.2-million and those of apartments around and over the half a million mark.

Tenants have been evicted as developers move to make a quick buck. Reclaim the City has highlighted this not only in Sea Point, but also Bromwell and elsewhere in Woodstock, an affordable taxi or bus ride way from the city or even, at a push, a walk. This expulsion of working-class and young professionals is real, and widespread. Once, looking to buy a flat in Sea Point a couple of years ago, I viewed what effectively were converted domestic service quarters – on at R1.2-million! The estate agent just shrugged his shoulders when asked about this. The city is complicit in this; its planning department gave approval for this conversion.

In this context, rentals in the City Bowl and adjoining areas have skyrocketed. Monthly prices of around R8,000 for a studio or from R14,000 for a two-bedroom flat seem to be the norm. It is not uncommon to hear of R6,000 being charged per room in a house in areas close to tertiary education institutions, where developers are erecting flats with starting price tags of well over R1.4-million for a studio. And with Airbnb the latest craze, more and more rental stock is dropping away from the long-term rental pool in central Cape Town and surrounds, increasing the housing crisis, according to The South African.

And so the City Bowl and surrounding areas remain largely off limits for a significant percentage of residents. What happens in Cape Town sets the tone for the Western Cape: of the provincial population of 6.27-million, according to Statistic SA’s 2016 Community Survey, just over four million live in the city.

Tariffs and rates can be progressive tools and serve social justice, as can rent-control in the last remaining council properties rather than selling them off to developers out to make a humongous profit. Why should the owner of a R25-million mansion in a leafy suburb or within whiff of the sea pay the same for electricity as someone with a R400,001 property on the far outskirts?

Differentiated tariffs linked to progressive property value thresholds, and usage, could raise revenue more justly, not only protecting the poorer households but also struggling working-class homes. And rates could raise more revenue by linking, for example, the number of toilets to rates: the more toilets, the more rates because of the greater pressure on the sewage system.

There are plenty of options. Given that the DA touts its administration of Cape Town as the best, it should put its systems and capacity to work for a socially just city beyond the blah blah blah rhetoric that does little to change the segregated cityscape. DM


Please peer review 3 community comments before your comment can be posted