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    City ‘can’t absorb more of 18.5% Eskom hike’, increasing financial pressures on Cape residents

    March 31, 2023 - Kristin Engel


      Cape Town - The City of Cape Town is being called on to absorb more of Eskom’s 18.49% electricity price increase after announcing that it would be reduced to 17.6% in Cape Town.

      The GOOD Party has urged the City to use the “surplus of public money sitting in the bank” to give people a break and still be left with savings.

      In tabling the draft “Building Hope” budget for 2023/24 on Wednesday, mayor Geordin Hill-Lewis included a 17.6% electricity tariff hike compared with Eskom’s 18.49% increase to offer a bit more protection for lower income customers on the subsidised Lifeline tariff while still funding plans to end reliance on Eskom.

      The draft budget is open for public participation until May 5.

      The City also made changes to the tariff structure for residents who qualify for the subsidised Lifeline electricity tariff. Previously customers using more than 350 units would pay R3.71 but now those customers will pay R1.84.

      However, the City has come under fire for not absorbing more of Eskom’s tariff hike as residents face unprecedented high costs of living with inflation already standing at 6.9%, spiralling food prices, fuel price increases, another interest rate hike and a sharp depreciation in the rand exchange.

      Brett Herron, the GOOD Party’s secretary-general and member of Parliament, said: “With regards to the City’s financial position, the City’s draft budget forecasts total cash-backed reserves at the end of this financial year of R16.3 billion, of which R7.4bn is cash on hand while the rest is cash-backed investments.

      “The City’s role is not to accumulate cash. When it accumulates cash through increased revenue and reduced expenditure the benefits of this must be passed on to the consumer.”

      GOOD Party’s finance councillor, Anton Louw, added that residents of Cape Town have already been paying massive mark-ups on electricity and on average the City pays 170c/kwh, while they sell it to the consumer for up to 433c/kwh.

      “There is thus enough space to absorb the new Eskom tariff,” Louw said.

      Herron said the mayor in his budget “made a meal” of increasing the amount of electricity poor people could buy at the lowest rate, but knows most of these customers can barely afford to buy any electricity.

      “If the mayor really wanted to give Capetonians a break he would have reduced the City’s blockbuster electricity tariffs,” Herron said.

      For several years now lobby group Stop CoCT has been pointing out the unfair tariffs for Lifeline users when they use more than 350 units before it was finally addressed by council, but even so the group believed that not nearly enough was done by the City.

      Stop CoCT founder Sandra Dickson said: “The Eskom increase is still applied by the City to more than 60% of the City’s costs directly related to Eskom. The 60% bulk purchased from Eskom should be the only portion of City electricity costs affected by the Eskom tariff increase of 18.49%.”

      “The City is still adding a whopping 17.6% increase to costs such as salaries, maintenance and other overheads. The 17.6% is way above the current inflation rate of 6.9% which would be more justly applied to salaries and other overheads,” Dickson said.

      In Premier Alan Winde’s energy digicon last week, Hill-Lewis said it was not possible for the City to absorb the cost of the tariff increase without it reflecting in tariffs for the City grid, given its bill of approximately R1 billion to Eskom every month.

      However, based on GOOD’s statement that the City projected a cash bank balance of R7.4 billion for the current financial year and has already accumulated R8.5 billion cash in the bank, to the ordinary citizen it appears that more of Eskom’s tariff hike could have been absorbed by the City.

      The City told the Cape Argus: “There are no surplus funds to use for these types of increases. No profit is made from the income from tariffs. The City’s R7.4 billion cash bank balance is what municipalities are required to have to maintain a cost coverage rate of between one and three months. The City holds operating cash and this is necessary to keep the organisation operating on a monthly basis, to pay for services and suppliers to deliver services."

      The City said that this cannot be used as the funds are committed for the operations of the City. National Treasury also determines that there must be sufficient operating funds held and therefore, this is not a surplus but a prescribed public finance management requirement.

      Finance Mayco member Siseko Mbandezi said: “Despite the limited room for manoeuvre, the City is saving residents a collective R100 million a month by absorbing as much of Eskom’s increase as possible.

      “If the City were to absorb the entire tariff increase, it would amount to more than R2 billion a month. The City, and its ratepayers, simply cannot afford this.”

      Mbandezi said about 70% of the City’s tariff income goes toward buying bulk electricity from Eskom, the biggest cost driver, with the remaining 30% invested back into service delivery and ending load-shedding.

      Mbandezi said relying on Eskom was simply unaffordable, that was why the City was moving forward with its plans to reduce its reliance on Eskom.

      Cape Argus


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