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
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.