Joburg revenue flow at risk amid flight from Eskom power cuts

The City of Johannesburg’s revenue is at risk of further decline as households and businesses look to alternative sources of energy, putting the squeeze on funds flowing to the city’s power distribution utility.

According to the Treasury, City Power, which is responsible for operating and maintaining the electricity distribution network of the City of Johannesburg, collected R9.3bn of revenue for the metro in 2022, representing 43.8% of the city’s total revenue up to December 31.

Joburg finance MMC Dada Morero told Business Day that load-shedding had cost the metro much-needed revenue as some residents and businesses were migrating to alternative sources of energy to lessen the effect of Eskom’s daily power blackouts, which can often last up to 10 hours a day.

His comments come on the back of a warning by the SA Local Government Association (Salga) that the government’s solar power tax incentive could hamper municipal revenue collection efforts as customers move off the grid.

City Power, which purchases power from Eskom for distribution within the city, needs to rethink its business model, “otherwise it will be irrelevant and employees could find themselves without jobs”, Morero said on Monday.

Morero’s comments come as revenue collection in the city fell 86% in October, translating into more than R500m of undercollection. The council’s budget for the 2022/2023 financial year stands at R77.3bn.

Data from the Treasury released on Monday shows that of the R154bn owed to metros up to December 31 2022, the City of Johannesburg contributed the lion’s share at 28.8% followed by Ekurhuleni at 19.9%, eThekwini at 14.5%, Tshwane at 11.8% and Nelson Mandela Bay at 9.8%.

“Households in metropolitan areas are reported to account for R115.1bn, or 74.7%, of outstanding debt, followed by businesses that account for R30.5bn, or 19.8%. Debt owed by government agencies is at R7.6bn, or 5% of the total outstanding debt owed to metros,” the Treasury said in a statement.

Morero revealed that the budget, to be tabled by May, could be lower than in previous years. The budget has been increasing over the years, with an allocation of R68.1bn for 2020/2021, R73.3bn for 2021/ 2022, and R77.3bn for the 2022/ 2023 financial year.

The city noted that some residents could not pay their municipal rates and taxes due to job losses, while businesses owe the city about R7.4bn.

The collection of revenue in township areas is low.

“It’s sitting around 30%. We need to increase that collection because the money collected in townships will be reinvested back into the townships.

“We are going to be unpopular ... we know people in townships can afford [to pay]; the affordability is there.”

Township debt

The metro plans to launch a programme aimed at encouraging payment for municipal services, “otherwise townships are going to collapse”.

The City of Johannesburg, which was under the administration of a DA-led multiparty coalition after the 2021 municipal elections, has been battling a cash flow crisis, which could lead to a failure to pay service providers or salaries for its 32,000-strong workforce or to honour its service delivery obligations to its residents.

Under the newly constituted political leadership, it recently approved a R2bn loan from the Development Bank of Southern Africa, to be used for operations, including its R900m per month salary bill.

Morero said his team had discussions with the Treasury in February regarding the financial challenges dogging the metro.

There were also informal engagements with finance minister Enoch Godongwana on these matters, though the metro has yet to engage financial institutions regarding its cash flow problems. He said about R100m is needed over three years to address the metro’s infrastructure programmes such as repairing roads and the electricity grid network and the provision of water.

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