‘Absolute governance collapse’: Joburg’s electricity chaos exposes years of mismanagement

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JEREMY MAGGS: It seems Johannesburg’s electricity crisis is no longer just about ageing cables and surprise outages.

A News24 investigation says City Power has failed for years to sell the electricity it buys from Eskom, with losses estimated at around R21 billion, while Eskom says the city now owes it more than R5.2 billion.

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Now, this raises a very worrying and blunt question: is Johannesburg just facing a power crisis or is this a complete governance collapse?

Julius Kleynhans is with me now, he’s the executive manager for local government at the Organisation Undoing Tax Abuse (Outa). Julius, welcome to you. So is this mainly a City Power financial failure, or do you think, as I’ve referenced, a broader governance collapse?

JULIUS KLEYNHANS: It’s an absolute governance collapse. This has escalated over a couple of years now. It’s not an overnight failure and we haven’t seen provincial oversight or any other intervention.

This has escalated over time, and unfortunately the losses are not just because people are not paying, it is really actually the grid that has not been maintained properly, and financial management has been absent.

We’ve even seen the National Energy Regulator of South Africa (Nersa), last year when the city was applying for tariff increases, Nersa told it to get its house in order and fix the losses first.

JEREMY MAGGS: It’s astonishing that a city can lose R21 billion in electricity value without any earlier political accountability. How do you read that?

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JULIUS KLEYNHANS: I think that is the biggest problem that we’re seeing with municipalities in general. There are no consequences for a lack of proper management. And unfortunately, R21 billion, again, that escalates over time.

We’ve seen that Nersa has also been absent in as a regulator, because they are supposed to make sure that the city is applying its tariffs properly, that is cost reflective and that they do it in a responsible manner.

So now we’ve seen that Eskom is starting to intervene. They haven’t been paid.

Again, the regulator needs to ensure that the licences are being agreed to, and that licence to City Power ensures that they can buy and pay for the electricity [from] Eskom and distribute it to its residents and businesses responsibly.

JEREMY MAGGS: To that point, Julius, Eskom, as you say, threatening possible disruption – if I’ve read this correctly — from 8 July. So just around the corner. Would that be justified then? Or is it simply a case of residents being punished for this massive municipal failure?

JULIUS KLEYNHANS: Look, I think that’s very important because residents and businesses cannot be victimised in this process. This is where Eskom needs to step in and ensure that those interests are protected, because of the economic implications that will come with it.

When the city fails to pay Eskom, I think a different method needs to be followed and maybe that is where intervention, I think in two ways, must happen.

The first one is the contempt of court, because the city didn’t adhere to the judgment that was there.

So I think individual consequences need to follow, that will set an example for future litigious matters and accountability.

The other thing is the collection; the revenue needs to be diverted so that Eskom gets its share and that the city gets the rest.

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They are talking about potential intervention in City Power. We’ve seen it in various other municipalities, to capacitate it to do its job properly, not only through revenue collection, but re-establishing and maintaining the grid.

So we might see that kind of intervention from Eskom, but it cannot cut the power.

Outa is also looking at different areas of remedy, potentially engaging with the Minister of Electricity and Energy (Kgosientsho Ramokgopa) as well as Treasury to ensure that the electricity is not cut to the city, but also to ensure that there’s a good short-term relief to ensure that the money flows to Eskom as well.

JEREMY MAGGS: How far down the line are those interventions?

JULIUS KLEYNHANS: Well, we hope to engage with Eskom and the ministry in the next week to start the deliberations to ensure that there is a feasible way forward. They have set a deadline where they are talking about 24 June, where they’ll make a final decision.

We can see that they’re strategically ticking the boxes to ensure that from an administrative action point of view, they are not being taken to court easily.

But we do believe that there’s a case made from people who are actually paying their bills every month, and you cannot just go and cut the power.

The consequence of that is a bit more severe than just electricity outages. Not only does it have economic implications, but it also, again, will result in water shortages and all those kinds of ripple effects.

But again, you have to look at the root cause of the problem. Even Eskom’s intervention is not a sustainable solution.

We also must make sure that if there is an agreement in place where Eskom does play a larger role, whether it’s through revenue collection or a kind of a revenue split, that it also has a deadline because who knows, maybe the elections has a different turnout and this cannot become a political affair, but rather focus on responsible administration and turning the city around.

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JEREMY MAGGS: What happens if Eskom, City Power and the city fail to resolve this crisis? I assume then that we’re looking either at managed cuts, financial collapse, or maybe even another bailout.

JULIUS KLEYNHANS: That’s a very interesting question. Look, I think from some of the criteria, they might have been approved for the bailout or there’s been an agreement from National Treasury, but they haven’t fulfilled those obligations.

So we can see there’s potential intervention. We’ve seen it in the water already from the Department of Water and Sanitation. I think this might probably fall into a litigious matter if they do not resolve it.

But again, I think it’s a bit more technical because Nersa has not been part of the discussion yet. This has been between Eskom and the city itself.

I think it might get ugly, and hopefully civil society does not have to intervene through the courts to stop it from happening.

But I think we’ve just seen in the last five years, the decay in the city, not only [from an] electricity point of view [but] from all sides and fronts.

I think the stability is very important now, especially with local elections coming up.

So I think [with] the political pressure [it] will most likely end up that the power will stay on. But I’m struggling to see the bailout that’s going to come from National Treasury.

JEREMY MAGGS: I’m going to leave it there. Julius Kleynhans, thank you very much indeed. He’s the executive manager for local government at the Organisation Undoing Tax Abuse.

Read:

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