‘Joburg inner city dwellers flee to hijacked buildings due to high service charges’

Landlords tell Nersa that Eskom’s increases are unaffordable.

If implemented, Eskom’s proposed tariff increase of 36% will gobble up a huge portion of the income of poor families in the Joburg CBD, even though they don’t buy directly from the utility.

Angela Rivers, general manager of the Johannesburg Property Owners and Managers Association (Jpoma), gave energy regulator Nersa an indication of just how unaffordable electricity will become for inner city dwellers.

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Jpoma members jointly represent about 70 000 residential units in the Joburg CBD, with about 350 000 people living in them. Their investment in the area is altogether about R18 billion.

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Rivers presented Jpoma’s data at a Nersa public hearing on Eskom’s tariff application at Gallagher Estate in Midrand last week.

Eskom has applied for the 36% increase next year, 11.8% the year thereafter, followed by 9% in 2027/28. If granted, its approved revenue in the three consecutive years will be R445 billion (up from R352 billion this year), R495 billion and R536 billion.

Criticism

The utility has been widely criticised for its effort to raise its tariffs by several multiples of the inflation rate, which was only 2.8% in the 12 months to the end of October.

Rivers told Nersa that their electricity bill will represent almost 60% of the monthly expenses of poor people living in the Joburg CBD next year, should Eskom get the green light from the regulator. For those on prepaid it will be 44%.

Rivers says unaffordable electricity and other municipal costs are driving residents out of compliant buildings to informal housing or hijacked buildings with illegal connections, where they get the services ‘for free’.

The metro council is losing twice – the income from those who used to pay, and the loss of income when electricity is stolen, she says.

Impact on social housing residents

The insights are based on data from people living in subsidised social housing where the rent is capped at R1 000 per month per unit.

They buy their electricity and other utilities from Joburg’s City Power. Rivers assumed the 36% Eskom increase will be passed on to consumers, and based her calculations on consumption of 320kWh per month.

Looking at the whole monthly municipal bill including electricity after the 36% increase, residents will be paying 76% of their expenses over to the City of Joburg, Rivers says.

Those in affordable housing whose total income is between R4 500 and R25 000 per month and don’t get any subsidy, will see an increase from the current R1 900 per month for 320kWh of electricity to R2 600.

Those living in one-bedroom units typically pay R4 500 per month rent. After the Eskom increase, their electricity cost will represent a third of all their expenses, up from the current 29%. Their total municipal bill will represent 43% of their expenses.

Some of the buildings have been converted to private luxury student housing with two students per unit, each paying R4 000 per month rent. That includes utilities, which can be up to R3 400 per month, leaving the landlord with only R4 600 to pay all the other expenses and get a return on investment.

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Rivers showed how the portion of the landlord’s income that is being consumed by municipal costs has been increasing over the past decade.

Over the period tenants’ total income has increased by 66%, and their rent by 25% (as landlords increasingly absorb costs). Municipal costs have increased by 283% for residents on prepaid and 232% for those on post-paid.

They pay about R600 more per month for buying from City Power than they would if allowed to buy directly from Eskom.

Impact on employers

The Association of South African Chambers (Asac) also objected to Eskom’s tariff application and highlighted the impact it would have on especially medium-sized companies situated in municipal distribution areas.

Asac was formed by the biggest business chambers in the country, including the Johannesburg Chamber of Commerce and Industry (JCCI) and its peers in Cape Town, Durban and Nelson Mandela Bay. It represents about 70 000 businesses that jointly employ about 85 000 people.

The organisation says if Nersa approves Eskom’s application, South African municipal tariffs will be among the highest in the world next year.

“Most medium-sized industry is located within municipalities, where tariffs are much higher [than those of Eskom],” Asac says.

“The application fundamentally compromises South Africa’s re-industrialisation – where will we find the needed jobs to address our unemployment crisis?”

It highlights the increasingly poor quality of electricity distribution by municipalities due to poor infrastructure as a result of inadequate maintenance, vandalism, electricity theft, and cable theft.

“There is little or no willingness to address the inefficiencies at a local municipal level because they recover these costs via the tariffs,” the organisation says.

“In most instances municipal customers pay a premium for a vastly inferior service. Excessive increases to Eskom simply enable the dysfunction and make us pay for it.”

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