South Africa’s free electricity disaster

South Africa’s policy of providing free basic electricity to a portion of the population has not had the desired effect, with only two million households receiving the benefit from a total of ten million that qualify. 

Eskom CFO Calib Cassim said this is because the mechanisms for delivering this relief to consumers have not worked. 

The failure of the policy to provide free basic electricity of 50 kWh to poor South Africans has come under increasing scrutiny as Eskom has asked for repeated above-inflation electricity prices. 

Since 2010, electricity prices have risen over 500% and have significantly outstripped inflation, increasing the cost of living for all South Africans. 

To relieve the pressure on households, the government implemented a policy of providing poor South Africans with free basic services, including electricity. 

This amount of electricity is enough to provide basic lighting, basic water heating using a kettle, basic ironing, and a small black-and-white TV and radio.

To qualify for free electricity, households must be on the lifeline electricity tariff, registered as indigent, or qualify for a pensioner’s rebate on service fees.

While this policy is good in principle, it has been largely ineffective in providing relief to South Africans, as the money allocated for free electricity does not reach those who need it most. 

“There is a concern that mechanisms in terms of free basic electricity are not being optimally utilised. Out of the ten million customers that should benefit from it, only around two million receive anything,” Cassim told Newzroom Afrika. 

He attributed the shortcomings to the mismanagement of the funds allocated towards free electricity by municipalities. 

“Through municipalities and the national government, we need to make sure that residents get full usage of the 50 kWh of free electricity.”

Cassim said this policy is key to relieving the financial pressure on South African households. 

Cassim’s concerns with the mechanisms of delivering free electricity to households largely echo those of Electricity Minister Kgosientsho Ramokgopa. 

“There is no reliable system that makes it possible to extend that benefit to households that qualify. In some cases, a system is in place, but its management is inefficient,” Ramokgopa said. 

“It is not a funding problem. It is an execution problem at the level of municipalities. There is a need for us to find a more reliable way to ensure households receive this benefit.”

As with Cassim, Ramokgopa pointed to the poor management of local municipalities as the major problem in getting free electricity to those who need it. 

These municipalities are allocated money form the National Treasury to extend the benefit to qualifying households. However, in most cases, the money is used in other areas. 

“Municipalities receive these grants, but the money does not filter through to the right people and is redirected to other areas in the municipality.” 

South Africa’s municipalities are under immense financial pressure as well due to the country’s stagnant economy, resulting in lacklustre revenue growth. 

Aside from ensuring the benefit flows through to the right people, a more fundamental problem lies with the financial sustainability of such a policy. 

“You don’t resolve this crisis by just extending free basic services. You resolve this problem by growing the economy. It is a crisis of economic production.” 

Without growth, the state’s finances will come under increasing pressure, and the crisis will become more acute. 

Energy analyst and managing director of EE Business Intelligence Chris Yelland has previously said it is vital for the government to understand what is going on regarding the provision of free electricity. 

“Municipalities misappropriate the money for free basic electricity for poor households in the full view of the National Treasury and government.”

Yelland said municipalities are using the money earmarked for free electricity on things it was not intended for.

“It is effectively robbing the poor and using the money to benefit the municipality,” Yelland said.