Joburg faces growing risk of widespread blackouts amid R4bn shortfall

Key topics:City Power warns R4bn bulk power budget hike needed or outages riskCity Power deficit widens as debt impairment and costs surgeLiquidity strain and R21bn liabilities threaten service delivery.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Jan Vermeulen.City Power has warned that if Johannesburg does not increase its bulk electricity purchase budget by R4 billion, it would face widespread power outages.Sunday Times reports that the warning came in a letter from City Power chairman Makhosini Kharodi in a 30 March letter addressed to Johannesburg city manager Floyd Brink.City Power is the Johannesburg metropolitan municipality’s power distribution company and is responsible for building and maintaining the city’s electricity infrastructure, as well as supplying electricity.The warning comes after City Power, in its quarterly report for the period ended 31 December 2025, said its financial situation would continue to deteriorate without intervention from the metro..Read more:.Helen Zille: “Duct-taped” City Power fawns on CR’s global guests, ignores Joburg locals.“City Power’s financial position for quarter 2 reflects a significant deterioration year-on-year, with the deficit after tax worsening by R869 million,” it stated.The power utility moved from a surplus of R5 million in Q2 2024/25 to a deficit of R864 million in Q2 2025/26. It had budgeted to achieve a surplus of R674 million.“This performance trajectory indicates ongoing structural challenges in revenue collection and cost containment,” it stated.City Power highlighted that costs were being driven by higher-than-budgeted debt impairment, mainly due to continued poor collection levels and increased bulk purchase costs.Makhosini said in his letter to Brink that both these issues were the metro’s responsibility. City Power does not handle its own revenue collection, nor the bulk purchase budget.In fact, City Power CEO Tshifularo Mashava had already asked for the city’s help regarding bulk purchases in the second-quarter report.“The City’s assistance is required to approve a mid-year adjustment to the bulk-purchase budget so that it aligns with actual demand-driven spend and avoids irregular expenditure,” Mashava said.The report showed that City Power’s revenue increased from R6.005 billion (Q2 2024/2025) to R6.601 billion (Q2 2025/2026), a 9.9% increase.This was driven by higher service charges, in line with approved tariff adjustments, increased units sold, and higher internal recoveries.“Despite revenue growth, the improvement is insufficient to neutralise expenditure pressures. This creates vulnerability in sustaining operating surpluses and meeting financial obligations,” it cautioned.“The positive revenue performance does not translate into improved liquidity due to structural inefficiencies on the cost side.”Revenue exceeded the budget by R62 million. While favourable, it said this was not material enough to offset expenditure overruns.City Power’s escalating costs .Total expenditure increased significantly from R6.0 billion (Q2 2024/25) to R7.465 billion (Q2 2025/26), or 24%. Expenditure exceeded the budget by R1.6 billion.“The main cost pressures are increased debt impairment, mainly due to continued poor collection levels and higher bulk electricity purchases, reflecting increased consumption and tariff adjustments.”City Power said the sharp increase in debt impairment indicates persistent weaknesses in revenue collection strategies, customer affordability challenges, and ageing debtors.“Rising bulk purchase costs exert further strain on cash flows and operational sustainability. These factors significantly elevate the organisation’s liquidity, funding, and credit risk exposure.”Current liabilities exceeded current assets by a substantial R21 billion. Current assets stood at R8.9 billion at the end of the quarter, while current liabilities were over R30 billion.City Power said the magnitude of budget overruns significantly heightens the risk of breaching liquidity thresholds and reliance on short-term funding interventions.It also warned that there was a risk of being unable to meet creditor obligations timeously and increased financial sustainability risk in the medium term.City Power warned that its swing from a surplus to deficit, if unaddressed, may lead to a deterioration of its cash position and increased pressure on the City of Johannesburg for funding support..Read more:.Hawks swoop on City Power in R500m scandal: Raid or routine? Corruption probe intensifies.It would also compromise its ability to maintain infrastructure investment and service delivery, and heighten exposure to adverse audit findings and oversight concerns.“The Quarter 2 results illustrate that while revenue growth is positive, unsustainable expenditure growth, particularly debt impairment and bulk purchases, remain the primary driver of financial underperformance.”MyBroadband contacted City Power for comment on Kharodi’s letter to Brink, but it did not immediately provide feedback. This article will be updated should comment be received..This article was first published by MyBroadband and is republished with permission.

Joburg faces growing risk of widespread blackouts amid R4bn shortfall

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