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Municipalities will be Eskom’s political shock absorbers for proposed 20% hike in electricity tariffs

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Cilliers Brink is a DA Member of Parliament.

Most municipalities are cash strapped, at best, and in a full-blown liquidity crisis at worst. Yet Eskom has eyed municipal consumers as the short-term solution to its long-term problems. Eskom’s proposed 20% increase is likely to lead to a more pervasive culture of non-payment, in essence, a tax revolt. 

If the energy regular Nersa approves the 20% increase in the cost of bulk electricity proposed by Eskom, it won’t just hurt the pockets of ordinary people, it might jeopardise any real chance of fixing South Africa’s ailing municipalities.   

Most municipalities are cash strapped, at best, and in a full-blown liquidity crisis at worst. They struggle to collect what is due to them by consumers, who in turn struggle to keep up with year-on-year above-inflation price increases on municipal services.  

Yet Eskom has eyed municipal consumers as the short-term solution to its long-term problems. The plan is to raise bulk electricity prices as soon as possible, with municipalities acting as Eskom’s collection agents and political shock absorbers.   

Municipalities then pass the cost of these hikes onto households and businesses. Or they can absorb some of the hikes by cutting budgets for water, electricity, roads, parks, repairs, and maintenance.  

Either way, the Eskom proposal to Nersa comes down to ordinary South Africans paying more, a lot more, to make good for two decades of poor planning by successive ANC Cabinets, plus the cost of cadre deployment, “preferential” procurement, and State Capture.  

If bad ANC governance has done permanent damage to Eskom, the utility’s new management cannot ignore the damage that has been done to ordinary South Africans. Our country hasn’t enjoyed significant economic growth in more than a decade. 

It turns out that inept, rent-seeking governments and their political class not only destroy institutions like Eskom, they also repel private investment of the non-Gupta variety — the kind of investment that creates jobs and boosts household savings.  

And so, a 20% squeeze on electricity consumers is likely to lead to a more pervasive “culture of non-payment”, in essence, a tax revolt, and a massive cost of living increase for those consumers who dutifully continue to pay their municipal bills.  

This will not only make South Africans poorer, but it will also threaten the long-term sustainability of local government, including municipalities where voters swept the ANC out of power in last year’s local government elections.  

Keep in mind that on top of paying bulk electricity prices handed down from Eskom, and approved by Nersa, municipalities must also budget for the cost of building, replacing, and repairing substations, feeder cables and the like. 

So even if you discount the cost of corruption and ineptitude in most (ANC-run) municipalities, the price that households must pay for electricity necessarily includes the cost of running a municipal electricity network.  

And this is where Eskom load shedding has done its most serious, unseen damage: municipal networks, already old and poorly maintained, were never designed for the wear and tear of being switched on and off at regular intervals.  

That is why stage 4 load shedding last year was followed by prolonged secondary power outages in Joburg and Ekurhuleni. In some small towns like Bethal, two-hour load shedding can cause up to 12 hours of repairs to the municipal electricity network. Of course, Eskom does not offset these costs against the debt owed to it by delinquent municipalities.  

And while there has been plentiful support from national government for rolling out electricity to all households, there hasn’t been the same drive and resources to maintain existing infrastructure.  

As national government support to Eskom and other mismanaged state-owned companies has increased, so grants to local government (as well as police, hospitals, and other essential services) have diminished. 

That’s why it is very important for Nersa to consider the arguments made by Mayor of Cape Town Geordin Hill-Lewis, against Eskom’s 20% increase. When DA mayors of the best-run towns and cities in the country speak out against these increases, they’re not only speaking for their own local communities, but they’re also speaking for the future of the entire local government sector.    

It’s time for the South African Local Government Association (Salga) and ANC mayors to also make their voices heard. DM

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All Comments 3

  • The ANC and its blind ideological faith is creating the perfect storm of destruction by sticking to to a single state owned entity. Some would argue that affecting an ungovernable state through gradual economic and structural decline is deliberate.

  • As far as our Municipalities are concerned I hope this isn’t the straw…….
    On another point while ESKOM is awful, bear a thought for the French. Their ESKOM equivalent , EDF has had to close down a number of nuclear stations and there may be a design flaw to deal with. At the same time, being over 80% government owned Macron is trying to stop electricity price increases at least before he is re elected. Its debt pile is higher than ESKOM’s. With our ESKOM experience, I think the French must expect the worst.

  • ” … a massive cost of living increase for those consumers who dutifully continue to pay their municipal bills.” Which is made up of middleclass (mostly white?) citizens who cannot afford to go ‘off grid’ neither do they become dishonest and connect illegally. Eskom and the municipalities should in fact give the paying consumers a discounted rate. Firstly to thank them for paying for the service they use, as opposed to the millions that don’t pay (because the anc promised free ‘everything’) and to encourage them to use more electricity to ensure the ‘going concern’ principle.

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