The government’s plan to give more electricity away for free

The government is conducting a policy review of South Africa’s Free Basic Electricity (FBE) framework, aiming to increase allocations to indigent households and improve access to the service.

This comes as South Africa’s free basic municipal services are severely underutilised, with around 80% of eligible households not receiving the service.

The percentage of consumer units taking advantage of free municipal services has declined over the past decade, despite the prices of these services having risen substantially.

In response to a recent Parliamentary question, Electricity and Energy Minister Kgosientsho Ramokgopa said South Africa is experiencing a structural cost-of-living crisis.

He attributed this crisis to a combination of weak economic growth, persistent unemployment, and rising prices for essential goods and services.

While the minister noted that the rising cost of living cannot be solely attributed to Eskom’s high electricity prices, he acknowledged that electricity pricing remains a critical cost component for households.

“The government recognises that electricity price increases, particularly when coupled with broader inflationary pressures and declining consumption, can have a regressive impact on households,” Ramokgopa said.

“This is especially true where consumers are paying more for a basic service while experiencing reduced affordability and constrained usage.”

To address this and attempt to ease the burden on South African households, the government has initiated a review of the country’s electricity pricing framework.

To this end, Eskom has proposed structural changes to tariffs through the Retail Tariff Plan (RTP). 

Ramokgopa explained that the RTP aims to implement the Electricity Pricing Policy by improving cost reflectivity, ensuring revenue sufficiency, and protecting affordability.

“The Electricity Pricing Policy is being revised to align electricity pricing with market reform while strengthening protections for affordability, transparency and equity, particularly for low consumption and vulnerable customers,” he said.

As part of this review, the government will also be looking into revising the Free Basic Electricity framework, with a focus on expanding the framework’s reach and effectiveness.

More free electricity

Adopted in 2001, the government’s Free Basic Service policy gives qualifying indigent households access to services like electricity, water, and solid waste removal at no charge.

These free services are capped, with FBE currently limited to 50 kWh per month per household.

In South Africa, municipalities are responsible for providing these services, but households must apply for and subsequently renew their access to FBE and other free basic services.

Statistics South Africa (Stats SA) previously cited this setup as one of the reasons for the decline in their use.

The percentage of consumer units using the FBE service has dropped from 25% in 2014 to 14% in 2023. Over this same period, electricity prices have risen by around 170%, far outstripping CPI inflation.

Thus, to address affordability concerns, the government has started a revision of the FBE framework.

Ramokgopa explained that this review will not only seek to increase the FBE allocation from the current 50 kWh per month, but also to improve access to the service.

The minister previously said that the current allocation of 50 kWh per household per month is “outdated”, but did not say by how much the allocation would be increased.

The Organisation for Economic Co-operation and Development (OECD) previously said the allocation would need to be increased by 50% to adequately support eligible households.

The low uptake of FBE in South Africa is largely due to a simple awareness problem.

Since the onus of registering for free basic services rests with households, they cannot reach South Africans who are unaware of their existence.

Stats SA previously explained that many households slip through the cracks because they are simply not aware that the FBE service exists.

If they are aware that it exists, many households do not know how to apply or know that they need to renew their status regularly.

“Measures are being pursued to improve access to existing Free Basic Electricity support, including addressing weaknesses in indigent household registration and improving administrative implementation,” Ramokgopa said.

The OECD previously estimated that 5.4 million, or almost 80% of eligible households, did not receive this service in 2020.

The organisation attributed this underutilisation to poor targeting, with many municipalities lacking registries of indigent households.

Municipalities also often struggle with weak administration and coordination with Eskom.