Exposed: Municipalities have diverted billions from the poor, depriving them of free basic electricity

A new electricity scandal has erupted in South Africa. Only two in every 10 poor households that qualify for free basic electricity have received it for at least the past five years, with municipalities diverting at least R40bn earmarked for indigents. This has been highlighted by Chris Yelland, one of South Africa’s top energy analysts. He speaks to BizNews about how it is very difficult – and often impossible – for poor people to register for free basic services and raises the questions about how it is possible that the authorities – from the National Treasury to municipal officials – have not raised the alarm about this situation. – Jackie Cameron

Chris Yelland on the misappropriation of billions earmarked to provide electricity to the SA’s poorest citizens:

This may not be corruption – it may be incompetence. Maybe [it’s] just poor management. Misappropriation is really about using funds for purposes for which they were not intended. It’s not necessarily theft and it’s not necessarily corruption, but certainly something that needs to be attended to. If R9bn in one year is being misappropriated, [it is] not reaching the intended recipients – which are the poorest of the poor in South Africa.

The background to this is the whole concept of free basic services, of which free basic electricity is part. This is a range of free basic services that is intended to be provided to the poorest of the poor, so-called indigent households. These are households below a certain level of income. They qualify to receive these Free Basic Services. Money is put aside and budgeted in the Treasury for these services and disbursed to municipalities in the form of what is known as the municipal equitable share of the National Treasury budget.

It’s a grant received by municipalities from the National Treasury, but for specific purposes. In the case of Free Basic Services, about R9bn that was intended to be used for free basic services was not used. It was used for other purposes within the municipality for which it was not intended. That is misappropriation of funds. But the people that suffer, of course, are the indigent households, for which that money was intended and for which they didn’t get it. They are supposed to get free basic electricity – up to 50 kilowatt hours a month. Something like 80% of those that qualify to receive free basic electricity are not receiving it.

On where the money may have gone:

I think it’s just gone into the common municipal revenue pot and then gets used for a whole range of other municipal activities and not for poor. Once it’s in the pot, it could be used for parties and Christmas functions – all manner of public relations activities. Who knows, some of it might even be stolen – as some of it inevitably is.

On how long this has been going on for:

The data that was presented by Dr. Tracy Ledger in her report on this matter – on which my article is based – gives figures for the last six years and the seventh year, being the current year. It’s nothing new. Free basic electricity was sort of conceived in 2003. I think there are a lot of people that should be asking questions. These are from the policy makers, through to the people that provide financial oversight on municipal expenditure and through to the people that actually implement these policies, the implementation agencies.

On oversight functions with regard to this expenditure:

I think a lot of people should be raising the red flag. From the presidency, where there’s planning taking place. National treasury, COGTA – that’s the Cooperative Governance and Traditional Affairs. There’s the Department of Mineral Resources and Energy, who are the ministry that is responsible for the whole policy of free basic electricity. When it comes to the people that should be monitoring, What about the National Energy Regulator of South Africa – they have a role of protecting the interests of the poor and protecting the interests of customers. They also have an oversight role.

Organisations like Eskom are part of the implementation of this policy, as are the municipalities themselves, represented by an organisation called SELGA – the South African Local Government Association. Lastly, there’s an organisation called the AMEU. This is a technical body of engineering types that have an association called the Association of Municipal Electricity Utilities of Southern Africa. They look at technical issues and implementation issues. They should be raising the red flag. I think there’s all manner of people that should be concerned, but they seem to be turning their eyes away from these issues.

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