Municipalities cannot contribute to SA’s just energy transition without the necessary resources — Salga president

Bheki Stofile.(Photo: X Former Twitter)

By Ethan van Diemen

26 Aug 2024

Bheke Stofile, the president of the South African Local Government Association, says a ‘vicious cycle’ of contradictory policies that introduce new energy players will undermine municipalities’ ability to raise revenue and contribute to the just energy transition.

At the Just Energy Transition (JET) Municipal Conference at the Gallagher Convention Centre in Midrand on Monday, Bheke Stofile, the president of the SA Local Government Association (Salga), said a contradictory mix of policies and a clause in a recently signed Act “may undermine the very purpose of our discussion today: the municipal energy transition”.

This month, President Cyril Ramaphosa signed into law the Electricity Regulation Amendment (ERA) Act, which “sets out far-reaching reforms of South Africa’s electricity sector, including the establishment of a competitive electricity market” and “provides for an open market platform that allows for competitive, wholesale or retail buying and selling of electricity”.

The ERA, however, includes a clause that Stofile argues is contrary to municipal attempts to contribute to SA’s nascent just energy transition.

The new law will open the electricity market to allow customers more options for buying electricity from different sources, rather than just Eskom or municipalities, potentially reducing revenue for already heavily indebted local governments.

Read more: After the Bell: The impending end of Eskom’s 100-year monopoly

Bheke Stofile, the president of the SA Local Government Association. (Photo: X / Twitter)

Municipalities’ role in addressing climate crisis

“COP28 [the 28th Conference of the Parties to the United Nations Framework on Climate Change] has set a clear global objective that emphasises the critical role of local government in leading climate actions,” said Stofile.

“Local governments are essential to implement the measures outlined in the COP28 resolution, which stress the need for inclusive and equitable participation across all sectors in the fight against climate change.”

COP28, in Dubai in 2023, featured the first-ever Local Climate Action Summit in recognition of the role local governments play in bridging the gap between national policies and on-the-ground implementation.

Stofile said the gathering was “crucial” because it “potentially marked the beginning of a serious journey of strategic intergovernmental cooperation towards transforming the municipal energy sector as part of South Africa’s broader climate change response”.

“We are fully aware that the energy transition is a matter of survival for humanity in response to climate change and a matter of survival for us as a country. Failure to transition in line with the global community — as COP28 highlighted — will have fatal consequences for our socioeconomic development, livelihoods and lives.

“Failure in this case is not an option to all of us,” he asserted.

Stofile said local governments should be at the forefront of climate action as they were “closest to the communities most affected by climate impacts” and therefore, were “uniquely positioned to drive climate resilience and adaptation strategies”.

He said it was concerning that in the electricity sector, the major driving force behind South Africa’s contribution to global warming and climate change, “Many of the decisions expressed in our policies and legislation have made it extremely difficult for municipalities to fulfil their mandates.

“The country’s municipal fiscal framework was designed with the expectation that municipalities will fund 90% of their mandates through locally raised revenues, of which electricity distribution revenue would constitute more than a third.

“However, due [to] national government intervention, about 60% of electricity distribution is performed by Eskom, leading to significant revenue loss for municipalities.

Read more: Municipal debt stunts Eskom distribution efforts, says minister of electricity

“Furthermore, municipalities’ attempts to engage Eskom in credit control measures have been refused, contributing to a ballooning municipal debt, which currently stands at R347-billion at the end of March 2024. This creates a vicious cycle where municipalities struggle to collect revenue, yet Eskom demands payments without supporting municipalities in their debt recovery.”

Daily Maverick asked Eskom to comment, but had not received a response by the time of publication. It will be added once it is received.

In a statement released in November 2023, Eskom said that in response to the mounting levels of municipal debt, they pinned their hopes on the Municipal Debt Relief programme facilitated by National Treasury.

‘Limited resources’

“A clause inserted into the [ERA] Bill — after the public participation process — and signed into law threatens to remove a significant portion of municipalities’ remaining electricity distribution functions,” the Salga president continued.

“Salga has repeatedly implored both Parliament and the President to reconsider this clause. We hope the effective date of the Bill will exclude this clause, as failure to do so may undermine the very purpose of our discussion today: the municipal energy transition.

“The transition bus is approaching the local government station. We hope that the bus is big enough to allow local government to get in.

“It is not enough to expect local government to follow behind with limited resources and no clear path… We urge you to bring a bus that allows the local government family to be part of the journey, determining the route and the speed together.”

‘Further talking’

Addressing the conference, Ramaphosa affirmed the Salga president’s assertions.

“Municipalities are central to our efforts to decarbonise the energy sector. Municipalities own and operate approximately half of South Africa’s electricity distribution grid and they facilitate universal access to electricity — 165 municipalities are electricity service providers.”

Acknowledging Stofile’s concerns directly, Ramaphosa said, “I recently signed the Electricity Regulation Amendment Act into law. Now I can understand Salga, as articulated by its president, would like some exceptions to be inserted, and they would like further talking to happen, particularly when … implementation begins.

“I am told this conference will confirm the establishment of the Just Energy Transition Municipal Forum as well as its secretariat. National government is rallying its teams to work with Salga and mayors to align on the JET programme of action for local government.” DM

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

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Our Burning Planet

Municipalities’ role in addressing climate crisis

‘Limited resources’

‘Further talking’