Municipalities want to take over all Eskom customers

The municipalities of Mzansi are turning to the courts to gain control of distributing and charging for electricity to all users in the country - including farmers. They argue that they are losing out on surcharge revenue that could subsidise other basic services

Eskom: The electricity tariff hike is another blow to Mzansi's agri sector faced with increasing tax and

The electricity tariff hike is another blow to Mzansi's agri sector faced with increasing tax and wage bills. Photos: Supplied/Food For Mzansi

As the South African Local Government Association (Salga) heads to court to take charge of all electricity distribution in Mzansi, farmers have called on municipalities to stay in their lane and focus on improving their existing basic services. 

Salga submitted an application to the Pretoria High Court for a declaratory order that would give municipalities exclusive rights to administer, distribute and sell electricity throughout South Africa. Should it be successful, about 78 500 agricultural customers who currently receive their electricity directly from Eskom, will become municipal customers.

Salga says in the application that there is a “fundamental problem” with having a dual electricity distribution system in a country covered by wall-to-wall municipalities: eight metro, 44 district and 205 local municipalities.

Among its key arguments is that municipalities lose out on electricity revenue which ultimately subsidises other basic municipal services.

“When Eskom distributes electricity within a municipality’s boundary, it does not pass a single cent back to that municipality.”

Salga court application

“On the other hand, when a municipality distributes electricity, it buys same in bulk from Eskom, adds a mark-up (subject to NERSA’s tariffs) and sells the electricity to customers. The total revenue municipalities had forgone in 2019 for example… is R162.36 billion.”

Salga further states that the current system creates credit control problems for municipalities, who cannot switch off electricity to “encourage” customers to pay their bills, and “customer discrimination because Eskom’s customers often pay less for electricity than their counterparts who receive electricity from municipalities”.

Service delivery agreements to allow surcharges

Salga now asks the court that Eskom be ordered to enter into service delivery agreements with municipalities – a matter which it says could never be successfully negotiated since 2013.

“The electricity will… be supplied by Eskom in bulk but Eskom would also reticulate the electricity on behalf of municipalities to residents. In this relationship, Eskom would at the very least be remunerated for the bulk supply of the electricity, like it would where it supplies electricity in bulk to municipalities.

“Because Eskom would be a service provider for the municipalities under the SDAs, the municipalities would then be able to apply surcharges when electricity is being reticulated and also exercise credit control by, for example, switching off electricity for residents who do not pay for other services… Evidently, the SDAs create a win-win situation for municipalities and Eskom.”

Salga court application

But where does it leave consumers? Farmers tell Food For Mzansi they are unconvinced municipalities, which are failing across the country, should be ultimately in charge of all power distribution to them. It also raises the question of cost.

‘They just want to make money’

Sehularo Sehularo, coordinator of Northern Cape farmers’ organisation Saamtrek Saamwerk, says it’s a matter of “rather the devil you know” – even though Eskom has its challenges, municipalities are not ideal candidates to take over the administration of electricity supply from the power utility.

“Their electricity is just too expensive. They just want to generate money by supplying us with electricity.”

Saamtrek Saamwerk coordinator Sehularo Sehularo

He is further concerned about Mzansi’s track record on municipal competence. “We do not trust municipalities to give us reliable electricity. They do not have capacity. We know that our municipalities do not have engineers. They are failing to deliver clean water and infrastructure. Most of our farmers are failing to operate their businesses because of poor service delivery. Most of our farmers in areas like Jan Kempdorp, even here in Kimberley, do not have clean water. Those are basics of municipalities,” Sehularo says. 

“The economy is already shrinking because of load shedding. What will happen when another incompetent service provider takes over? I think if [municipalities] end up having those exclusive rights, our problems are just beginning. As the farming community in our area, we would rather stick to Eskom.”

A wasteland of wilted spinach on Rabelani Nemanilwe’s farm, after a 48-hour power interruption by Eskom. Photo: Supplied/Rabelani Nemamilwe

Rabelani Nemanilwe from Mooinooi in Rustenburg says municipalities need to get their house in order before taking over the huge responsibility of power supply to everyone in Mzansi. Nemanilwe receives electricity directly from Eskom and lost an entire harvest of spinach in a 48-hour power interruption earlier this year. His inability to irrigate and save his crops, led to job losses on his farm and an investment of over R50 000 going down the drain. 

He feels that having an alternative supply of electricity will be best for farmers – one that is independent from the state altogether.

Municipalities already struggling to pay Eskom

Agri SA’s Christo van der Rheede says that if Salga were to succeed, it would result in an increase in electricity tariffs and an often unreliable supply of electricity, which will be devastating for many farmers.

“The biggest challenge remains many municipalities’ inability to pay their outstanding debt to Eskom to honour their contractual financial agreements with Eskom, ensuring a constant and affordable supply of electricity to paying customers, and maintaining local electricity infrastructure. “

He says that as long as these issues persist, many municipalities could not be trusted with being the sole suppliers of electricity.

Francois Wilken, president of Free State Agriculture, says they will do everything in their power to prevent the application from succeeding as food security depends on agriculture, to which a municipal power takeover will be devastating.

“If we look at what municipalities’ capacity is with service delivery and how billions of rand are already outstanding to Eskom through municipalities, it seems to me that their purpose with this whole application is to try to supplement the losses they already have, with profits from electricity sales.”

Free State Agriculture president Francois Wilken

Wilken says farmers cannot wait for days and weeks for electricity to be switched on when harvesting is at a critical stage. “Municipalities [have poor] track records around service delivery and the ability to do the maintenance of their own infrastructure. How are they going to maintain power networks after hours and also on weekends? We are very worried and will do everything in our power to prevent this from happening. ”

ALSO READ: Farmers have ‘lost all faith’ in municipalities

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