The Minister of Cooperative Governance and Traditional Affairs (CoGTA), Dr Zweli Mkhize delivered an address at the Local Government Energy Summit convened by the South African Local Government Association (SALGA) on 08 March 2018 in Sandton, Johannesburg.
Minister welcomed the summit as an important step towards achieving the goals we set ourselves of providing electricity to South Africans as envisaged in the National Development Plan (NDP). The NDP 2030 further stipulates that South Africa’s energy sector will promote economic growth and development, social equity and environmental sustainability.
The South African constitution guarantees every citizen access to services such as refuse removal, electricity, housing and water. In South Africa, we cannot talk about electricity without mentioning the important role played by Municipalities, especially in power distribution into households. There are 257 Local Municipalities of which 188 are licensed through NERSA (National Electricity Regulator of South Africa) to distribute electricity to consumers.
The summit, therefore brings to the forefront the question of how best municipalities can be able to continue providing this important service to communities. Electricity is one of the major sources of revenue for municipalities and in recent years that revenue source has seen a decline in municipal profit margins due to higher cost of bulk electricity.
The level of municipal debt is growing on a monthly basis from all the categories, namely organs of state, business and households and this has already landed a number of municipalities into bankruptcy and some dysfunctional.
Minister indicated that a major challenge is ensuing in many municipalities in the country due to inadequate collection of revenue as a result of the runway non-payment for municipal services. This places pressure on municipalities to generate their own revenue to supplement the often inadequate funds they receive from the national government.
Aggregate municipal consumer debts were R143,6 billion as at 30 September 2017. Government’s share of the outstanding debtors was R 5,7 % at R 8,2 billion. The largest component relates to households which accounts for 70.8 percent or R101,6 billion followed by commercial or business for 16.8% or R24,1 billion and other category of debtors for 6.7% or R9.6 billion. Minster indicated that if we want to build effective, efficient and sustainable municipalities, this situation cannot be allowed to go on.
This culture of non-payment, coupled with ever-escalating costs of providing municipal services, has a negative impact on the availability and quality of municipal services, which could spiral out of control if it is not managed well. This is a serious concern as it has a potential to render Municipalities dysfunctional and unable to service its bulk accounts such as water and electricity. This situation negatively affects the paying customers as services have to be interrupted.
There are a number of reasons for non-payment of services by communities as a results of a number of factors like poverty, poor service and the negative culture adopted by some in our communities of not paying for the services received from Municipalities. For those who genuinely are not able to afford paying for services, government has introduced the Free Basic Services. These services are accessed by the indigent households that appears on the register.
Municipalities are experiencing cash flow problems which have resulted in some defaulting on their bulk electricity account with Eskom and recently water account. The Minister raised a concern that the municipal debt owed to Eskom stands at R30 billion.
In order to respond to the challenges of electricity debt, the Inter-Ministerial Task Team (IMTT) on Electricity was established in order to deal with Constitutional, Systemic and Structural Challenges in electricity distribution and reticulation based on the principles of the Intergovernmental Relations Framework Act, 2005 (Act No 13 of 2005).
Thus far, the IMTT has made progress in an effort to resolve the challenge. Defaulting Municipalities have made arrangements with Eskom to pay their outstanding debt. A concern that the Minister raised, is that there are some Municipalities that have already regressed and unable to service the bulk electricity account.
Minister Mkhize called on all communities who can afford to pay for services, to do so as their contribution to moving South Africa forward. He called of communities to ride the wave of optimism engulfing our country and ensure that we deliver an energy efficient sector that meets the objectives of providing economic growth and development, social equity and environmental sustainability. The energy sector tells another success of the democratic South Africa as the provision of electricity stands above 86 percent of the population.
In conclusion, the Minister called for Municipalities to explore using other forms of energy generation to bring power to communities. The future of the generation, transmission and distribution of energy is changing rapidly and it is vital that municipalities stay ahead of the curve.
Media Enquiries:
 Legadima Leso
CoGTA: Head of Communication
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