City Power does not pay Eskom for between R3 billion and R4 billion worth of electricity each year. Governance expert Prof Alex van den Heever said this is because the Johannesburg utility cannot collect enough money from its customers.
Van den Heever told Newzroom Afrika that the gap is not new. He said City Power has had this problem for a long time, according to Daily Investor.
“The bulk purchasing from Eskom is always at a deficit, because they are never raising the revenue to cover the bulk purchases,” Van den Heever said.
“That deficit grows and grows. It is growing at about R3 billion to R4 billion a year in the case of City Power and has been for a considerable time,” he said.
He estimated that City Power has built up a structural deficit of about R25 billion owed to Eskom over recent years. This is not the amount the utility owes Eskom right now.
The City of Johannesburg and others have often stepped in to help City Power manage the debt. The report said the debt can only be reset through deals between the city and Eskom.
Part of the shortfall comes from illegal connections to the grid in Johannesburg. A lot of electricity used through these connections is never billed.
Van den Heever said the main problem is that the utility’s billing and revenue systems have collapsed.
“The deficits are a consequence of the collapse of revenue-raising systems that are in place, and that is because no one is actually competent enough to run them,” he said.
According to the report, money is not coming in, but City Power keeps paying for bulk power and salaries. It cannot stop buying power, or Johannesburg would be left in the dark.
The billing system also sends out wrong bills because of broken equipment. Thousands of homeowners and businesses have faulty meters, which leave them with very high electricity bills.
Van den Heever said poor skills are not the only cause. He said corruption also plays a large part.
“A large portion of the deficit is corruption. There is corruption in almost every aspect of the city. There is no reasonable explanation for what we are seeing,” he said.
He pointed to the city’s backlog in infrastructure spending as an example. He said Johannesburg has an investment shortfall of R150 billion to R200 billion, and much of it belongs to City Power.
“That backlog should not exist. That money should have been steadily invested in infrastructure maintenance and upgrades. The shortfall means that money has disappeared,” Van den Heever said.
The report said there is little oversight of key officials and operations at City Power. This has led to the looting of municipal funds meant for infrastructure.
City Power is fully owned by the City of Johannesburg. It does not generate its own power. It buys electricity in bulk from Eskom and independent power producers.
The utility then sends that power to customers over a network of about 19,000 km of power lines. It also handles metering and billing, and uses the money it collects to pay Eskom.
Van den Heever said many officials at the city work without being vetted and without being held to account. “These people can get away with murder and there are no consequences,” he said.
Source: this article is based on reporting by Daily Investor. Image: Daily Investor. Written with the help of AI and published by the Tzaneen Voice Business desk. See our Editorial Standards.
Anelisa Nkuna covers business and money news for Tzaneen Voice. Anelisa reports on the rand, fuel prices, interest rates, jobs, Eskom, Transnet, farming and company results. The aim is simple: explain what the numbers mean for household budgets, small businesses and workers in South Africa.