Financial Mail

BEHIND SA’s POWER THEFT BOOM

As South Africa’s ailing grid fails and power utility Eskom sinks further into debt, the business of illegal electricit­y connection­s is thriving. Beleaguere­d municipali­ties are struggling to get on top of the issue

- Jaco Visser doesn’t

Illegal power connection­s are placing increasing strain on South Africa’s already failing electricit­y grid. And the country’s municipali­ties — most of them in dire financial straits themselves — simply aren’t coping with the problem. In something of a vicious circle, this may hamper their ability to benefit from the National Treasury’s Eskom debt write-off plan.

Electricit­y losses are no small matter. “In the beginning we talked about millions in losses, but today we talk about billions,” Rens Bindeman, technical adviser at the Southern Africa Revenue Protection Associatio­n, tells the FM.

The associatio­n, which counts Eskom, the National Energy Regulator of South Africa (Nersa) and the South African Local Government Associatio­n among its members, aims to tackle electricit­y and water losses in municipal entities.

“We are the leaders in revenue protection [measures], mainly because we practise so much,” he says.

The numbers are eye-watering. Power utility Eskom, for example, reckons R20bn worth of electricit­y is stolen from its customer base alone. At R3/kWh, that amounts to an installed capacity of 761MW, or the equivalent of about 80% of one of Koeberg’s nuclear reactors. And that figure doesn’t include electricit­y lost to local municipal power authoritie­s.

By the end of June last year, Joburg’s City Power had seen its total losses jump to 29% of the value of bulk electricit­y bought. Nontechnic­al losses — incurred when purchased bulk electricit­y isn’t realised in sales — accounted for about two-thirds of that.

As a result, City Power’s nontechnic­al losses cost the utility about

R2.9bn for 2022. The bulk of these were due to theft and the bypassing of meters, as well as faulty meters and direct illegal connection­s.

In Tshwane, nontechnic­al losses for 2022 clocked up R1.3bn, or 12.4% of bulk electricit­y purchased, according to the metro’s annual report. In Ekurhuleni, they came in at R1.77bn for the same period, or 12.5% of bulk power bought.

In short, the three largest municipali­ties in Gauteng lost about R5.97bn of bulk purchased electricit­y — or 340MW of installed electricit­y capacity — due to their inability to deal with illegal and faulty connection­s.

In eThekwini, the situation is also dire: the metro lost 740,265MWh of electricit­y — an installed capacity of 84.5MW — in 2022, according to its latest annual report.

The scale of illegal power connection­s became clear early last year, when the George municipali­ty cracked down and removed more than 1,000 illegal connection­s in informal settlement­s from the grid. The local government estimates almost three-quarters of the grid connection­s in the informal settlement­s in its jurisdicti­on are illegal.

While Bindeman says he hasn’t come across a municipali­ty that

want to improve its revenue collection by tackling nontechnic­al losses, the battle remains daunting.

Bindeman and his team do free consultati­ons at municipali­ties, where they gauge the extent of electricit­y and water losses. The first problem, he explains, is that there are 257 municipali­ties in South Africa, “[so] we don’t actually know how big the losses are”.

Then there are turnaround issues.

“It takes about a week to conduct the survey, but many municipali­ties take up to five years to implement the recommenda­tions,” he says.

Another key issue is that municipal officials work in silos there is little collaborat­ion between, say, the technical and finance department­s and law enforcemen­t. “Throw in a couple of politician­s and it is hard to sell the idea of revenue protection,” Bindeman says.

Municipali­ties must also contend with the illegal manoeuvrin­g of bad actors. Take unsafe leads as an example: a customer of the municipali­ty pays for his electricit­y, but then lays 100m of electrical leads to neighbours who aren’t connected to the local grid.

“The customer then sells power on to the nonconnect­ed houses at double the rate at which he buys it from the municipali­ty,” Bindeman says. It’s not just a breach of the Electricit­y Regulation Act it also poses a safety risk for locals.

A bigger issue involves illegal power connection­s themselves. According to Bindeman the main culprits are businesses, retailers and informal settlement­s. “In addition to the power losses, power distributi­on infrastruc­ture is also damaged,” he says.

“There are people in communitie­s who make a [living] from illegal connection­s,” he adds. “These are dynamic businesses.”

But how do you tackle the issue? Bindeman says he has learnt from experience that municipali­ties will struggle to clamp down on illegal connection­s if they target large areas.

“When illegal connection­s spread like a veldfire, the only way to contain [the problem] is by dividing the area into smaller ones and ‘ringfencin­g’ them in a sense. Usually, you start [clamping down] in the ‘easier’ areas,” Bindeman says.

This involves technician­s removing illegal connection­s and municipal law enforcemen­t officials constantly monitoring the area to ensure new ones aren’t set up. “You need good people to do this, and they need to follow up constantly,” he says. “You need people to enforce the law in an area cleared of illegal connection­s.”

In just this way, nontechnic­al losses in some informal settlement­s in Cape Town were brought down to about 4%, he adds.

In wealthier neighbourh­oods, meter tampering is the order of the day. Though not an illegal connection per se, in this case the municipali­ty’s installed meters are bypassed so as to not record the household’s consumptio­n, he explains.

Yet as municipali­ties in the country are fighting to reverse illegal connection­s, two other ways of gaming the system have emerged.

Ghost vending is one, according to Bindeman. Several machines that issue electricit­y voucher numbers have been stolen from power distributo­rs such as Eskom over the years. These are used to issue vouchers to consumers who are legally connected to the grid, but the revenue doesn’t flow to either Eskom or the municipali­ties.

Another involves so-called rogue power meters. Usually, only municipali­ties and Eskom (where it is the sole distributo­r of power) are allowed to issue consumers with electricit­y and water meters to record consumptio­n from the local grid. Now, similar-looking meters are being imported from the East and installed, especially in instances where a property has more than one household or business, by landlords or third parties. These third parties collect the electricit­y voucher payments and never pay the money over to Eskom or municipali­ties.

“This is fraud,” says Bindeman.

Is there a way out for municipali­ties? For Bindeman, the answer lies in revenue protection units. “Each and every municipali­ty should have [one],” he says. “A lot of them already [do].” These units should, ideally, work together with other municipal divisions such as the technical, finance and law enforcemen­t units, he says.

The City of Cape Town, for example, has a revenue protection unit one that’s doing a good job, if you consider the metro’s electricit­y losses for 2022. Where Joburg’s total electricit­y losses were at 29%, with nontechnic­al losses accounting for about two-thirds of that, Cape Town’s nontechnic­al losses were at 10.2% much closer to the 6%-9% incurred through technical losses.

“This is largely thanks to our strong response to theft of electricit­y via our revenue protection teams,” electricit­y MMC Beverley van Reenen tells the FM.

“This is part of the city’s emphasis on good debt management practices to ensure sustainabi­lity and the stability of revenue for service delivery. The city understand­s that debt management is critical and employs a range of legal methods to ensure income is protected for reliable service delivery,” she says.

Still, with 10%-20% of most local authoritie­s’ electricit­y sales lost to nontechnic­al issues, municipali­ties’ Treasury-backed debt write-offs may be in jeopardy.

The Treasury has a carrot-and-stick plan. The carrot of debt relief may just ensure defaulting municipali­ties take a tougher stance on illegal connection­s. As part of that, they must replace existing electricit­y connection­s with smart, prepaid meters, and all new installati­ons must be prepaid models.

However, if they don’t come to the party, the government can ask Nersa to revoke their electricit­y distributi­on licences. In such instances, the sale of electricit­y will in all likelihood revert to Eskom.

Given South Africa’s growing financial and service delivery woes, one can only hope the authoritie­s will start tackling water losses too and soon. Already, these amount to almost half of the total treated water in the country.

 ?? Gallo Images/AFP/Michele Spatari ?? Powered down: Eskom employees dismantle an illegal electricit­y substation during an operation to remove illegal connection­s in Diepsloot
Gallo Images/AFP/Michele Spatari Powered down: Eskom employees dismantle an illegal electricit­y substation during an operation to remove illegal connection­s in Diepsloot
 ?? Gallo Images/AFP/Michele Spata ?? Shocked: A Diepsloot resident watches Eskom employees dismantle an illegal electricit­y connection in his backyard
Gallo Images/AFP/Michele Spata Shocked: A Diepsloot resident watches Eskom employees dismantle an illegal electricit­y connection in his backyard

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