South Africa’s biggest cities face major electricity crunch – My Comments

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[What's happening in South Africa? The answer is: More FAILURE as usual. Jan]

New data from Stats SA shows that South Africa’s municipalities are heavily reliant on electricity sales for revenue and that load shedding and the ongoing problems at Eskom are crippling these streams for the country’s biggest cities.

Citing data from its quarterly financial statistics of selected municipalities survey, Stats SA noted that municipalities in South Africa generate most of their revenue from electricity sales.

Those involved in providing services buy electricity from producers, such as Eskom, and then resell the power to households, businesses and other institutions. The resulting surplus from this trade is a vital source of income.

Municipalities spent R50.2 billion on electricity purchases in the first six months of 2023. In turn, they generated R60.0 billion from electricity sales.

The R9.8 billion difference between the two represents a surplus that municipalities can use to cover other expenses, the group said.

“Electricity sales take up a significant slice of the revenue pie. In fact, it’s usually the biggest revenue stream,” Stats SA said.

In the first six months of the year, electricity sales accounted for just over a quarter of total municipal revenue. Sales of electricity were followed by funding from the government, in the form of transfers and subsidies and then property rates.

Stats SA noted that the balance of these revenue streams differs across municipalities, but generally speaking, urban municipalities will derive most of their revenue from own-generation sources (like electricity sales and property rates), while rural municipalities are more dependent on government transfers and subsidies.

However, for any municipality that’s dependent on own generation of revenue, electricity sales dominate – and the impact of load shedding and the ongoing Eskom power crisis is definitely being felt.

The stats body noted that electricity trade eased in the first half of 2023 compared to 2022, with load shedding being present on all but one day over the period.

“It’s difficult to tease out the exact impact of load shedding on municipal purchases and sales as the data are influenced by several factors. It is notable, however, that both municipal purchases and sales of electricity softened in the first six months of 2023,” it said.

Municipal electricity purchases decreased by 0.8% compared with the first six months of 2022. This is the first time since 2018 that a decline was recorded in the first half of the year.

Municipal electricity sales increased by 0.6%, the slowest rise since 2018, Stats SA said.

Because of the rural/urban imbalance, however, the impact of lost electricity sales hit much harder in the eight metropolitan municipalities, which account for the bulk of total electricity sales across local governments.

In the first six months of 2023, five of the eight metropolitan municipalities recorded a decline in sales compared with the same period in 2022. Mangaung, the City of Ekurhuleni and eThekwini registered increases.

Notably, eThekwini was hit with disasters which exempted it from load shedding (it returned to normal load shedding in late May), and Ekurhuleni was taken to task by Eskom in July for not implementing load shedding properly, which could account for the discrepancies.

Longer-term data from the South African Cities Network shows that the country’s biggest cities have seen a major decline in electricity revenue over the last decade, while property rate hikes are one of the revenue streams that have seen a sizeable jump.

This supports concerns raised by property groups, that raised red flags over sharp increases in property rates over the last few years, ostensibly to make up for the lost sales of electricity.

SACN’s research, using audited financial data from the National Treasury Local Government Database, shows that the average annual growth in property rates in all big cities was 10.2% (above inflation of 5.7%) between 2010/11 – 2015/16 and 9.1% (above inflation of 4.2%) from 2015/16 – 2020/21.

Revenue from electricity, meanwhile, has declined significantly.

Source: https://businesstech.co.za/news/finance/725340/south-africas-biggest-cities-face-major-electricity-crunch/