Councils steal from the poor

BASIC SERVICES: R9BN ‘BUDGETED FOR FREE ELECTRICITY MISAPPROPRIATED’ Report shows in six financial years funds fail to reach poor households.

Anew research report published by the Public Affairs Research Institute reveals that in the 2019-20 financial year alone, R9 billion budgeted and disbursed by South Africa’s National Treasury to local government for the provision of free basic electricity (FBE) to the poorest-of-the-poor has been misappropriated by municipalities.

The report, titled Broken Promises: Electricity access for low-income households – good policy intentions, bad trade-offs and unintended consequences, by Dr Tracy Ledger, further shows that in the six financial years from 2014-15 to 2019-20, about R38.3 billion disbursed by National Treasury for FBE to indigent households failed to reach the intended recipients and was, instead, used by municipalities for other unauthorised purposes.

This situation continues unabated and is, in fact, worsening. “The number of households receiving the FBE benefit has generally declined over the past five years, while the number that is funded in the national budget has increased,” says Ledger in the report.

The 1998 Government White Paper on Energy Policy clearly documents government’s policy of universal access to electricity and the provision of FBE to indigent households in South Africa, alongside other free basic services such as water, sanitation and refuse removal.

The research report by Ledger, shows that a sum of R435.04 per indigent household per month, and totalling about R54.1 billion for about 10.1 million indigent households, was calculated, budgeted and disbursed by National Treasury to municipalities to fund free basic services in the 2020-21 financial year.

However, the research report indicates that currently less than 30% of the 10.1 million indigent households that qualify for free basic services, and for which municipalities received the budgeted allocation of R54.1 billion in the 202021 financial year, actually received any free basic services.

Furthermore, in the case of free basic electricity, only about 21% of the 10.1 million qualifying indigent households actually received FBE in the 2019-20 financial year, and only 21% of the R11.4 billion disbursed by National Treasury to municipalities for FBE was actually used by municipalities for the intended purpose.

This has occurred in the face of rapidly rising electricity prices from Eskom and much higher prices of electricity supplied by municipal electricity distributors and serves to increase levels of poverty in South Africa.

In terms of government’s FBE policy, qualifying indigent households may receive 50kWh of electricity free of-charge per month.

The majority of indigent households are situated in Eskom areas of electricity supply, while the remainder are in areas supplied by municipal electricity distributors.

“Local government is the gatekeeper of the free basic services programme [including FBE] and is the final arbiter of who can access these. In terms of that policy, it is each municipality’s responsibility to identify households within its boundaries that qualify for indigent status,” says Ledger.

Municipalities are not required to fund the provision of free basic services, including the 50kWh of FBE, from their own revenue. Instead, there is an annual allocation in the national budget to each municipality in respect of these services, through the Local Government Equitable Share, which is disbursed by National Treasury from the fiscus.

The number of households receiving the benefit has declined