R200 electricity charge ‘a lazy fundraising exercise’

The City of Joburg’s introduction of a R200 electricity surcharge for prepaid customers has received much criticism, with questions over whether it is even needed.

The Organisation Undoing Tax Abuse (Outa) is the latest organisation to comment on the surcharge, labelling it as a poorly conceived strategy to address the City’s R49.650 billion customer debt.

A burden on residents

Julius Kleynhans, executive manager for Local Government at Outa says the surcharge is a lazy fundraising exercise by those in power to address the skyrocketing customer debt. However, the surcharge is placing a strain on already burdened paying residents and businesses.

There has been a public outcry since the implementation of the electricity surcharge. Kleynhans says the municipality and its utility, City Power, claimed to have held a public consultation. The surcharge was implemented the same day as the electricity increase, which was approved by the National Energy Regulator of South Africa (Nersa).

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Concerns identified by OUTA

Outa, through its initiative JoburgCAN identified issues that need immediate attention to address the underlying problems associated with the new surcharge and the City’s financial management. Kleynhans stresses that the City needs to provide transparency on how the revenue from the surcharge will be used, as there is not a lot of reflection in the current budget.

One of the concerns identified is the rising of the customer debt. Kleynhans says according to the figures from the City’s Section 71 report quarterly reports to the National Treasury, customer debt has gone from R4.604 billion in just six months to R49.650 billion as of 31 March 2024.

“This includes a substantial R40.309 billion owed by households for utilities such as water, rates, sanitation and electricity,” says Kleynhans.

Electricity debt standing at R7.654 billion is also listed as a concern. The debt has increased by R709 million over six months. “This debt largely pertains to postpaid customers, with prepaid users paying upfront and incurring no debt,” Kleynhans says.

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He also raised the issue of mismanagement of public funds, as the City is often accused of overspending on remuneration packages, staff numbers, and personal security while underspending on essential maintenance. “This raises questions about the true allocation of funds raised through the new surcharge.”

Despite the City saying public consultation was had, Kleynhans mentioned failed public participation as one of the concerns. “The huge backlash against the prepaid surcharge underlines the City’s failure to run a meaningful public participation programme around the budget, leaving customers angry and resentful.”

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More customers must move to prepaid

Julia Fish, OUTA’s Manager for the JoburgCAN initiative says City must encourage customers to move to prepaid. She emphasises this will help manage and reduce customer debt.

“The City has also failed to implement a realistic indigent register, despite receiving funding from national government every year to support this. This leaves the genuinely indigent with no access to funding, increases the customer debt problem, and allows City officials to spend that crucial funding elsewhere.”

She also stressed the need for public involvement. “This surcharge illustrates the need for the public to participate meaningfully in the municipal budget process. If charges like this are to be exposed and opposed, it needs public involvement in the process.”

JoburgCAN has initiated a Promotion of Access to Information Act (PAIA) request to the City of Joburg, asking for information including the cost-of-supply study that City Power was required to provide to the Nersa to motivate the tariff increases.

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More possible solutions instead of surcharge

Fish suggests the City urgently re-evaluate its strategies to reduce customer debt such as expanding prepaid use and implementing high-profile disconnections.

JoburgCAN also calls on the City to urgently overhaul and expand the indigent register to ensure that all qualifying residents receive the support they are entitled to and urgently need. Ensuring that more residents are registered will not only provide necessary relief to low-income households but will also help address the underlying issues affecting the City’s growing debt and financial sustainability.

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