Further energy woes as only one top defaulting council gets energy grant

Cape Town – Municipalities which owe Eskom millions for electricity are not only battling to pay back their debt, but are also missing out on a grant which would allow them access to funding for energy billing and green energy solutions.

Only one of the top 10 defaulting municipalities which owe Eskom millions for electricity is taking advantage of the assistance of the Energy Efficiency and Demand Side Management Grant, according to gazetted annexures with local government finance data.

According to an annexure in Volume 636 of the Government Gazette, titled Specific Purpose Allocations to Municipalities, only Govan Mbeki Local Municipality would get R6m in each of the financial years between 2018/19 and 2020/21.

The Municipal Infrastructure Support Agent is a fund allocation and management body which holds a variety of funds available to municipalities, many of which do not have the capacity to generate revenue needed to fund their operations.

The grants are conditional and can be used to fund a variety of functions. They are aimed at supporting poor councils and giving dysfunctional ones capacity.

The top 10 defaulting municipalities owe about R13bn to the power utility in total cover four provinces. Maluti A Phofung, Matjhabeng and Ngwathe local municipalities are in the Free State Province. Emalahleni, Govan Mbeki, Lekwa and Thaba Chweu local municipalities are in Mpumalanga.

In May, Auditor General Kimi Makwetu announced that audit outcomes for municipalities have continued to regress, with irregular and fruitless and wasteful expenditure each ballooning more than 70% for the 2016/17 year.

Naledi and Ditsobotla local municipalities are in the North West Province, while Emfuleni Local Municipality is in Gauteng Province. Most municipalities also complained that electricity meters were outdated and that they did not have the funds to replace them with prepaid meters.

This is according to a municipalities which briefed Parliament's Standing Committee on Public Accounts last week on their challenges in paying Eskom.

Municipalities have the right to apply for allocations from the Energy Efficiency and Demand Side Management Grant, but it is a conditional grant whose funds cannot be underspent or misspent.

In June, mayors, municipal managers and chief financial officers from these councils told Parliament that they struggled to pay because of dysfunctional revenue collection systems and a negative payment culture where some residents defraud or protest their way out of paying electricity bills.

Only 32 of the country’s 257 municipalities received money from the grant.

Even Cape Town Metropolitan Municipality (R10m) and EThekwini Metropolitan Municipality (R14m) got funding from the grant, despite metros’ capacity to generate their own revenue by the billions.

But it is not clear why others are not taking advantage of it.

The South African Local Government Association (Salga) has also conceded that that the grant has limitations in that most councils struggle to use it and other conditional grants for the development of bulk infrastructure.

"Although the Energy Efficiency and Demand Side Management Grant provides funds for retrofitting existing infrastructure to become more energy efficient, municipalities have limited guidance on how other municipal capital grants may be used to invest in energy efficient infrastructure," according to Salga's handbook on efficient green energy solutions which could be funded by municipal grant. The handbook is titled Energy Efficiency and Renewable Energy in Existing Infrastructure Grants.

Salga head of energy policy Nhlanhla Ngidi told Fin24 on Wednesday that the grant was aimed at implementing energy efficiency and green solutions to the municipal infrastructure. He said it started when the country was going through power capacity challenges in 2008.

“This grant is not discriminatory; it’s for all municipalities in the country who want to reduce their use of energy in their facilities and also contribute in the reduction of carbon emissions as required in the national government energy efficiency and demand side management strategies,” Ngidi said.

Ngidi said it was a conditional because it was allocated in relation to a specific programme and nothing else. However, he said municipalities still have to apply for it.

He said in addition to the Energy Efficiency and Demand Side Management Grant, the interventions presented below are focused on equipment to ensure compatibility with the purpose of the capital infrastructure grants.

Operational changes are best funded through operational grants such as the equitable share, an unconditional grant provided to all municipalities, it said. The grant allocated R215m in 2018/19, R227m in 2019/20 and R239m in 2020/21.

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