On Monday, Eskom announced that it would suspend electricity supply to 13 municipalities with outstanding debt, and negotiate with another 21 municipal councils in arrears for electricity costs. According to Eskom’s acting CEO, Matshela Koko, the power utility is owed R10.2 billion from municipalities. Koko has urged municipalities to honour their debts or face disconnection.
The prospect of disrupted electricity supply has sparked public outrage directed at local administrations – understandable, yet often not well informed. Corrupt councillors and incompetent officials have been summarily and uncritically blamed for municipalities’ failure to repay Eskom.
AfriForum’s Markus Pawson told Eyewitness News that “the real culprits are the municipality managers, the municipalities themselves and the councils, in the decisions they have taken financially that now the people of South Africa have to bear the brunt of”.
The DA has insisted that the electricity debacle “is the consequence of years of poor financial management, corruption and wasteful expenditure. This is precisely what happens when a government puts its friends and cronies first, and the people last.”
But what this singular focus on maladministration neglects is any sense of the complexity that many officials face in keeping the lights on. We call for the public conversation to be expanded beyond simplified stereotypes, and consider a broader range of factors which make the monthly task of repaying Eskom a challenge for many municipalities.
A culture of nonpayment?
Even in relatively well-functioning municipalities, officials often manage to scrape up just enough revenue to avoid indebtedness. Lephalale Local Municipality, for instance, which incidentally hosts two major Eskom power stations, encounters major challenges in recouping its electricity costs. Illegal connections result in significant losses of revenue. Even among those legally connected, the municipality reports widespread late payments or nonpayment. Besides not being able to pay Eskom on time, late payments and nonpayments delay upgrades of ageing infrastructure, which leads to more loss of electricity.
According to Lephalale’s electricity manager, a key problem arises from the fact that consumers have three months to settle bills before being disconnected, while the municipality is forced to pay Eskom every month: “We must take every punch for each and every customer who’s owing”.
These issues are repeated across many municipalities.
The annual report of Ventersdorp Local Municipality – one of those against which Eskom has already instituted scheduled power cuts – notes an alarming electricity loss of 40% which “cripples the municipality financially”. The council embarked on a “revenue enhancement programme” to address under-collection, but noted that the “community is not responding positively to paying for municipal services”.
In Mogalakwena Municipality in Limpopo, councillors were forced to embark on door-to-door campaigns.
In many places, crisis has in fact followed a rapid expansion of access to electricity – a key promise in political campaigns. In Tswaing Municipality, currently facing disconnection, provision increased from 39% of households in 2000 to 77% in 2010. Here, expanded provision has come at the expense of a stable fiscus.
Increasingly, councils have authorised the roll-out of smart meters in an attempt to curb losses and expedite debt collection. However, these are frequently met with fierce resistance from residents. Where meters are installed, officials complain that they are often by-passed.
An official from the SA Local Government Association (Salga) blames a “culture of nonpayment” among residents, stemming from a history of resistance against the local state during apartheid.
Yet it is not simply local residents who have been slow to pay municipal bills. Officials also encounter obstruction from other organs of state with outstanding service debts of their own.
Last year, Salga noted that a number of government departments owed about R5.4 billion to local municipalities.
Debt collection and credit control have been pinpointed by the Auditor-General as key weaknesses in many municipalities. Addressing this is far from straightforward, however. Municipalities frequently find themselves at the bottom of the employment food chain, unable to attract sufficient skills given resource constraints – especially in the smallest municipalities. As a result, many are forced to outsource the job to private firms, incurring greater costs.
An economics of non payment?
While improved credit control and maintenance may help alleviate revenue shortfalls, the worsening economic realities of small towns present a basic challenge to establishing a stable balance of payments over the long term. Beyond a “culture of nonpayment” lies what Ashwin Desai, sociology professor at the University of Johannesburg, has described as an “economics of nonpayment”.
While electricity tariffs have increased substantially over the past few years, so too have unemployment rates in many small towns. This has increased the burden on local municipalities, who are required to provide free basic services to those classified as “indigent”. The failures of national government to create jobs and reduce poverty thus affects municipalities directly.
Ventersdorp Municipality acknowledged “very little economic activity in the municipality, hence the low tax base [which] results in the municipality being grant-dependent and experiencing a burden to provide free basic services to the poor communities”.
The integrated development planning of the small Ubuntu Local Municipality in the Northern Cape – also facing disconnection – notes with a “67% poor household community, it is very difficult to exercise credit control”.
In Matjhabeng Local Municipality in the Free State, in perpetual debt with Eskom, 21.2% of residents are unemployed while 42.8% are not economically active. The municipality’s annual report for 2014/15 states that “the municipality would have to create employment in big numbers in order to absorb these unemployed numbers to boost its revenue base” – an unlikely prospect in the foreseeable future.
The electricity debt crisis cannot be disconnected from the decay and deindustrialisation that is afflicting rural towns across South Africa. This is not simply caused by corruption, although it is certainly exacerbated by it.
We need to recognise how expanded access to basic services and growing poverty put severe strain on the municipal fiscus, and find manageable ways to maintain this access. One way to assist local municipalities is to ensure that they have the necessary technical and fiscal support from national and provincial spheres of government. Arresting the decline of rural economies and diversifying sources of municipal revenue are tasks that demand sustained attention over the long term.
Therefore, rather than placing the blame for the current crisis singularly at the door of local government, we urge greater understanding of broader systemic factors that undermine efforts by municipalities to maintain a healthy balance sheet and keep the lights on.
Nqaba, Pearson and Chilenga conduct studies into the dynamics of local governance in a range of municipalities across the country for Public Affairs Research Institute
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