Outrage over City of Johannesburg’s prepaid electricity surcharge continues

• The Organisation Undoing Tax Abuse (OUTA) in South Africa, through its initiative JoburgCAN, is raising alarm over the City of Johannesburg’s recent introduction of a prepaid electricity surcharge, describing it as a poorly conceived strategy to address the City’s burgeoning customer debt, with debt older than three months now standing at an alarming R49.650 billion.
• The City of Johannesburg’s MMC for finance, Dada Morero, has subsequently announced that it will be reviewed. Read more    

“The new prepaid surcharge appears to be a lazy fundraising exercise by authorities who have no clear strategy for addressing the skyrocketing customer debt whilst placing the burden on paying residents and business to cover the City’s inefficiencies,” says Julius Kleynhans, Executive Manager for Local Government at OUTA. “The City needs to provide transparency on how the revenue from this surcharge will be used, especially given the lack of its reflection in the current budget.”

Related news: City of Johannesburg hikes prepaid electricity prices by six to twelve times the inflation rate for poor and indigent customers

On 1 July many households were abruptly surprised by the new prepaid service charge being implemented by the City, leading to widespread public outcry. City of Joburg and its electricity utility City Power claimed there had been public consultation, insisted the charges would remain, and dismissed any opposition as political, leaving residents confused, frustrated and some households under severe financial pressure.

Key points of concern

JoburgCAN has identified some critical issues that need immediate attention to address the underlying problems associated with the new surcharge and the City’s financial management.

• Rising customer debt: The total customer debt has surged by R4.604bn in just six months to R49.650bn as at 31 March 2024 (the latest figures available) and has nearly doubled over the past four years. This includes a substantial R40.309bn owed by households for utilities such as water, rates, sanitation and electricity. This is the debt older than three months, which is regarded as bad debt. These figures are from the City’s Section 71 report quarterly reports to National Treasury.
• Electricity debt increase: The electricity debt alone stands at R7.654bn, having increased by R709 million over six months. This debt largely pertains to postpaid customers, with prepaid users paying upfront and incurring no debt.
• Inadequate indigent register: Despite receiving annual funding from the national government to support indigent residents, the City has failed to implement an effective register, leaving many without necessary support and exacerbating the debt issue whilst grants were either not spent or used for other purposes instead of subsidising the poor.
• Mismanagement of public funds: The City is accused of overspending on remuneration packages, staff numbers, and personal security, while underspending on essential maintenance. This raises questions about the true allocation of funds raised through the new surcharge.
• Failed public participation: The huge backlash against the prepaid surcharge underlines the City’s failure to run a meaningful public participation programme around the budget, leaving customers angry and resentful. This surcharge illustrates the need for the public to participate in the municipal budget process. If charges like this are to be exposed and opposed, it needs public involvement in the process.

OUTA’s JoburgCAN division has your back

The new prepaid service charge of R230 (inclusive of VAT) came into effect in the City of Johannesburg on 1 July 2024. This tariff affects the poorest in the city the most, while the indigent register only covers 3% of those that need free basic services. JoburgCAN has been calling for the charge to be scrapped. Joining forces with the Johannesburg Crisis Alliance, we demanded that the Mayor Kabelo Gwamanda be held accountable for his poor handling of the tariff changes and that he and his mayoral committee be removed. Our protest action on July 27 saw communities throughout the city join together to demand better services, an end to water outages and the scrapping of the prepaid fee. Further billing issues such as the invoicing of new deposits and changes to business prepaid rates continue to be reported to JoburgCAN and we are working closely with partners to get clarity and support to the residents of Joburg. Visit our billing resources page to find out more about how to declare a dispute over your bill and to answer questions on the prepaid tariff changes.

For more information on JoburgCAN, visit here.

Author: Bryan Groenendaal

Content source: OUTA