ES KO M The Soweto headache
Eskom CEO Brian Dames has a R3,2bn problem. And it is growing as every minute passes. Dames needs to find a solution to the problem of nonpayment for the electricity that Eskom sells to the country’s biggest township, Soweto.
Eskom finance director Paul O’Flaherty says: “We recover only 20% of everything we sell to Soweto.” He says the R3,2bn debt has accumulated over the past 10 years in the township, where Eskom is a direct supplier.
The number of paying users has risen since 1991, in Soweto as well as in the rest of SA. Only in Soweto do consumers refuse to pay in such large numbers, says O’Flaherty. “We don’t have problems in other townships.”
The reasons for nonpayment for electricity — as well as other municipal services — are historical. In the 1970s and 1980s many townships refused to pay as part of the defiance campaign. The trend has continued until this day, and in particular in Soweto.
Now a solution is needed to reverse this culture of nonpayment.
“The solution can be a combination of a political and a supplier-customer nature,” says Dames.
On the political side, government could change the law and allow Eskom to supply the City of Johannesburg with electricity which it would then distribute to Soweto, collecting the payment itself, says Dames. But though that might help get the Soweto problem off Eskom’s hands, it would merely shift it to the city.
Of course there is an incentive for the city to supply electricity to Soweto. It would be able to generate desperately needed revenue on the mark-up it would receive from users, if they paid. Electricity distribution is already municipalities’ biggest revenue earner, says O’Flaherty.
Eskom could also attempt to move Soweto residents to a prepaid system. But the sheer numbers of nonpaying consumers — some of whom have threatened to attack Eskom employees for installing “expensive electricity” meters — and the culture of violent protests make it almost impossible for Eskom to install the infrastructure that will force people to pay.
“In Soweto our technicians have often had to be accompanied by armed guards when upgrading infrastructure,” says O’Flaherty. The municipality has met similar violent and at times deadly resistance when it attempted installing prepaid water meters.
The most effective weapon any supplier has at its disposal to recover unpaid fees is withholding the service in question. But because of the political consequences it’s unthinkable for state-owned Eskom to switch off power to the country’s single biggest township.
It’s almost certain that Eskom will never see a cent of the growing amount owed it by Soweto residents.
Whatever solution is eventually arrived at will not be easy. And it will almost certainly include Eskom agreeing to write off the existing debt in exchange for a more workable and sustainable solution.