South Africa’s next electricity crisis is here

Municipal underinvestment in electricity distribution infrastructure is a crisis that has left many South African households in the dark.

In a media briefing on Monday, 8 July 2024, Electricity Minister Kgosientsho Ramokgopa said Eskom has done exceptionally well in ensuring that its generation units have been able to meet demand over recent months.

This is why South Africa has been load-shedding-free for over 100 days now.

However, he said South Africa is now facing a “different problem” on the distribution side, which means that not all households in the country have a consistent electricity supply. 

“This threat and the risk has come to pass as a result of perennial underinvestment in the distribution infrastructure by municipalities,” he said.

For example, he referenced investments in transformers and substations, which are the responsibility of South Africa’s municipalities.

Ramokgopa also attributed these issues to municipalities’ poor planning and management, as well as a lack of technical capacity. 

He explained that part of the reason for municipalities’ underinvestment in electricity infrastructure is that many do not ringfence the revenue they generate from electricity sales for infrastructure investment and maintenance.

“We have seen that there’s little to no investment that has been made in the replenishing, maintenance, upkeep and the protection and modernisation of this infrastructure and as a result of that, municipalities are under severe strain,” he said. 

This strain has led many municipalities to implement load reduction, which is similar to load-shedding.

Load reduction is a long-established process that Eskom uses in specific areas when there is sufficient electricity available, but a transformer’s integrity is at risk due to overloading.

Load-shedding is used when the national grid is constrained, and there is not sufficient capacity to generate electricity to meet demand.

Ramokgopa explained that, essentially, South Africa’s distribution infrastructure does not have the capacity to meet the country’s reticulation demand.

This results in some households not having electricity for parts of the day.

“That has nothing to do with the performance of Eskom. It has everything to do with downstream inaction on the part of municipalities. That’s the crisis that is confronting us,” he said.

Municipalities in turmoil

The National Treasury’s local government revenue and expenditure report for the third quarter of the 2023/24 financial year revealed major financial problems in South Africa’s municipalities.

This report covers local government performance against adjusted budgets for the third quarter of the municipal financial year ending 31 March 2024 and includes spending against conditional grant allocations for the same period.

Similar to the second quarter of the 2023/2024 financial year, this report highlighted major issues in municipal spending, including weak revenue collection, increasing municipal debts, and grant allocations not being spent.

In recent years, several experts have spoken out against municipalities misusing their funds.

Former President Kgalema Motlanthe previously warned that South Africa’s municipalities are heading for collapse, saying that 66 of them are totally dysfunctional and 163 are in distress.

Motlanthe, whose foundation has focused on issues with local governments since 2019, urged the national government to drive municipalities to increase their efficiency and capacity.

At the end of the third quarter of the 2023/24 financial year, municipalities’ aggregate spending was R411.4 billion (66.3%) of the total adjusted expenditure budget of R620.7 billion. Aggregated billing and other revenue was R452.8 billion (73.4%) of the R616.6 billion budget.

Capital expenditure was R38.1 billion (48.3%) of the adjusted capital budget of R79 billion.

The adjusted operating expenditure budget was R541.7 billion, of which R373.3 billion (68.9%) was spent.

Municipalities decreased their salaries and wages budget by R1 billion, from R154.5 billion to R153.5 billion. As of 31 March 2024, R108.5 billion (70.7%) of the adjusted salary budget was spent.

The Treasury has previously warned that grave underspending in this regard could have dire consequences on respective municipalities, especially in terms of councils fulfilling their service delivery mandates.

This echoes the Electricity Minister’s concerns about municipalities’ underinvestment in electricity infrastructure.