South Africa's latest power struggle: unpaid bills

Reuters News
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Posted: Nov 19, 2014 7:43 AM

By Xola Potelwa

SOWETO South Africa (Reuters) - Zodwa Madiba has not paid an electricity bill in 14 years and is resolute she never will, holding the ruling African National Congress (ANC) to vague promises made in the dying days of apartheid to provide free electricity to all South Africans.

Such defiance is widespread in the sprawling township of Soweto, crucible of the anti-apartheid struggle and home to 1.5 million people who, between them, owe state power utility Eskom 3.6 billion rand ($327 million) in unpaid bills.

Although the sum is dwarfed by the 225 billion rand revenue shortfall Eskom says it faces over the next 4-5 years, it is important symbolically as the utility battles to raise money for new power stations needed to keep the lights on in Africa's most advanced economy.

Eskom generates almost all the electricity in South Africa, and nearly half that produced in the whole the sub-Saharan region. Prices are set by the energy regulator, but Eskom says it costs more to produce than what South Africans pay for it.

Given Soweto's history since the 1960s of militant activism -- such as burning barricades, school boycotts and a systemic refusal to pay utility bills -- locals are unlikely ever to pay up, setting a disturbing example for the rest of the country.

Soweto owes more for electricity than the rest of the country put together, where arrears total just 2.6 billion rand.

"If you remember, when this government entered they said 'Free electricity for all'. Tell me: what does that mean?" asks Madiba, a 57-year-old community activist and member of the Soweto Electricity Crisis Committee (SECC).

Founded to counter the government's refusal to deliver free or affordable electricity, the group says Sowetans continue to suffer from poverty and joblessness that linger 20 years after white rule ended.

"At that time people were fighting apartheid, so they didn't pay. Now, they just don't have money. Young, old and middle aged, there are no jobs. People are depending on grants from their granny," Madiba says.

Under the ANC, millions of South Africans have escaped poverty through social welfare but the grants are weighing on government finances, especially as the economy stalls and one in four people remain without work.

Eskom is in something of a vicious cycle: without economic growth, powered by electricity, there will not be enough tax money for sustained social spending and to invest in infrastructure, including power generation.

NEED TO PAY

With Eskom in financial trouble, the government says all South Africans should do their bit, a message widely rejected in Soweto, where the SECC regularly reconnects -- illegally -- those whose power has been cut off.

The utility says it has a plan to improve debt collection and get customers paying but declined to comment on Soweto's history of institutionalized delinquency.

Ten years ago it was forced to write off 1.4 billion rand in debts owed by Sowetans, creating the impression for residents that they can get away with it.

"That's the bed Eskom made and they are starting to sleep in it. I don't know what else you can actually do," said economist Chris Hart at Johannesburg consultancy Investment Solutions.

"People need to be paying for those services. It's really as simple as that."

Eskom's bad debts rose to 1.1 percent of revenue in 2013/14 from 0.82 percent the previous year, suggesting its billing plans have some way to go and emphasizing the need for alternative funding.

The government is injecting an extra 20 billion rand into the utility, and may convert a 60 billion rand loan into equity, but other funding options are narrowing fast. Moody's cut Eskom's credit rating to junk two weeks ago.

"Eskom is not in a comfortable space because the credit rating agencies are looking at this and seeing there are multiple challenges at all levels," Hart said.

($1 = 11.0095 rand)

(Editing by Ed Cropley and Robin Pomeroy)