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High cost of electricity places unbearable burden on the poor – a new model is needed

Chris Pappas
By Chris Pappas
4 Aug 2024
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Eskom’s annual double-digit increases in electricity prices have placed an unbearable burden on households already struggling to make ends meet. For families relying on social grants, the rising cost of living means they are forced to stretch every penny even further.

Electricity provision by municipalities, particularly in smaller municipalities, is becoming increasingly unsustainable. A confluence of rising costs, high unemployment, and the inadequacy of current social grants has left many poor households unable to afford electricity.

The grim reality is that the promises of affordable electricity for all are becoming more elusive by the day, and it is the most vulnerable who suffer the most.

The recent announcement by the ministry to review power prices over affordability concerns, as highlighted by Minister in the Presidency responsible for Electricity, Kgosientsho Ramokgopa, underscores the urgent need for intervention. However, it is crucial to look deeper into the structural issues that have led to this crisis. 

Eskom’s annual double-digit increases in electricity prices have placed an unbearable burden on households already struggling to make ends meet. For families relying on social grants, the rising cost of living means they are forced to stretch every penny even further.

https://www.youtube.com/watch?v=HGVHBbOqKlU

The grants, which have not kept pace with inflation, are insufficient to cover basic needs, let alone the escalating cost of electricity. The current provision of 50kWh of free basic electricity per month is woefully inadequate. This allocation is intended to ensure a basic standard of living, yet it falls far short of what is needed for a dignified existence.

For instance, this limited amount is often exhausted long before the month ends, leaving families in darkness or having to choose between electricity and other essential needs such as food and transport. As a practical example, using an iron for one hour a day for 31 days uses about 31kwh, or, using a fridge for 24 hours a day for 31 days is about 112kwh, or a geyser for three hours a day for 31 days is about 419kwh (the energy experts out there will probably have a go at my numbers).

A pensioner receiving a R2,180 grant per month must make very difficult decisions about food, transport, heat, family support, accommodation, medication, etc. 

High unemployment rates exacerbate the situation. With fewer people earning an income, more households depend on social grants, which are stretched thinner each year. The lack of job opportunities, particularly in small municipalities, means there is little to no financial cushion for many families.

Vicious cycle


This economic strain makes it even harder for residents to pay for electricity, leading to a vicious cycle of debt and disconnection. These debt collection and loss reduction strategies by municipalities are often very costly and ineffective for a number of reasons. 

Maintaining and replacing old infrastructure is another significant challenge, especially in areas with low or no income. Municipalities often lack the funds to invest in necessary upgrades, resulting in frequent power outages and unreliable service.

The ageing infrastructure not only affects the quality of life but also hampers economic development, as businesses cannot rely on a stable power supply. As communities grow, municipalities must build and plan for the future. This is difficult when electricity in many municipalities is a loss-generating operation. 

Eskom’s control over revenue-generating areas and its reluctance to cede these to municipalities further complicates the issue. Municipalities are often left with the less profitable areas, which limits their ability to generate sufficient revenue to maintain and improve infrastructure. This control imbalance means that while some areas may benefit from more reliable service, others are left to struggle with inadequate resources. 

A culture of nonpayment has taken root, mostly due to political promises made by the ANC to its voters. Despite policies and laws enacted during its term in office that ostensibly support electricity payment, there is a contradictory stance that has led to confusion and non-compliance.

This culture undermines the financial stability of municipalities, which were designed to rely on revenue from electricity payments to sustain their operations. 

To address these issues, a multilayered approach is required. Firstly, there needs to be a review and increase of the free basic electricity allocation to ensure it meets the needs of a dignified living standard. Additionally, social grants must be adjusted in line with the rising cost of living to provide a genuine safety net for the poorest households.

Improve economic stability


Secondly, there must be a concerted effort to create job opportunities, particularly in smaller municipalities, to reduce the reliance on social grants and improve economic stability. This can be achieved through targeted investment in infrastructure projects that not only upgrade ageing systems, but also create employment.

Furthermore, a more equitable distribution of revenue-generating areas between Eskom and municipalities is essential. Constitutionally, this is a function that rests with municipalities. This would allow municipalities to have a more stable revenue base and invest in necessary improvements.

Lastly, it is crucial to foster a culture of payment through clear and consistent communication from political leaders and the implementation of supportive policies. Encouraging a sense of civic responsibility and understanding the importance of paying for electricity services is vital for the sustainability of municipal provision. 

There has been a lot of talk by the new leadership at a national level about supporting municipalities: the starting point must be to analyse how their own policies that are imposed on municipalities contribute to the sustainability of municipalities.

It is still early days for the new coalition government, but there are signs that different ministers are talking the right language. Government systems and processes are slow, but we are hopeful that the words translate into quick reform that is not punitive, but supportive. DM

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