South Africa: Energy policies will leave us behind – municipalities
Municipalities in South Africa are central to the country’s efforts to decarbonise the energy sector, says President Cyril Ramaphosa.
However, the SA Local Government Association (SALGA) says government policies and legislation for the electricity sector will make it more difficult for municipalities to fulfil their mandate.
In opening the two-day Municipal Just Energy Transition Conference in Midrand, Gauteng on Monday (26 August), President Ramaphosa emphasised the crucial role of municipalities in the energy transition.
He pointed out that municipalities own and operate approximately half of the electricity distribution grid in South Africa and facilitate universal access to electricity.
One hundred and sixty-five municipalities are electricity service providers.
The President said that through the Integrated National Electrification Programme grant, municipalities are responsible for addressing the electrification backlog.
Municipalities, therefore, need to be in the driving seat when it comes to providing clean, affordable energy to communities, businesses and industry.
“One of the aims of this conference is to unlock the institutional arrangements required to drive the decarbonisation effort.
“The Just Energy Transition Implementation Plan approved by Cabinet last year includes a dedicated municipal portfolio roadmap.”
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Three areas of focus
1. Providing access to affordable, clean electricity
“Municipalities are now able to purchase power directly from independent power producers and establish their own power-producing entities.”
2. The issue of sustainable financing for electricity infrastructure
“The municipal grid system needs to be upgraded, modernised and extended. The energy generation of the future requires systems that are fundamentally different in terms of design, capability and operation.”
Smart metering must accommodate the increased penetration of renewable energy at different scales.
“[Smart metering] will need to facilitate wheeling and feed-in by small-scale embedded generation.
“Massive investment is needed to ensure optimal grid control, safety and energy storage. This investment will need to draw on both public and private sources of capital.”
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3. Strengthen the capacity of municipalities to manage the transition
“This requires extensive training and upskilling. New systems will be required to identify human resources, technical capacity and other needs within municipalities and plan and budget accordingly.
“Municipalities will need to adopt best practice when it comes to the design and implementation of programmes and projects.”
Also, the government wants to move away from ‘parachuted’ development, where projects are conceptualised at the national government level and don’t take into account the realities on the ground.
President Ramaphosa said the District Development Model will seek to address this approach.
“One of the objectives of the District Development Model is localised development that is directly responsive to community needs.
“We need to be particularly aware of this when it comes to the just energy transition.”
Municipalities in South Africa continue to face uphill financial battle
SA Local Government Association (SALGA) president Bheki Stofile told the conference that municipalities are being hamstrung by government policy.
“In the electricity sector, many of the decisions expressed in our policies and legislations have made it extremely difficult for municipalities to fulfil their mandates.
“The country’s municipal fiscal framework was designed with the expectation that municipalities will fund themselves 90% of their mandate through local raised revenues of which electricity distribution revenue would constitute more than a third.
“However, through national government intervention, about 60% of electricity distribution is performed by Eskom leading to a significant revenue loss for municipalities.
“Furthermore, municipalities’ attempts to engage Eskom in credit control measures have been refused, contributing to a ballooning municipal debt which currently stands at R347 billion at the end of March 2024.”
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Stofile said this creates a vicious circle where municipalities struggle to collect revenue.
“Yet, Eskom demands payments without supporting municipalities in their debt recovery.
“The Electricity Regulation Amendment Act poses a new challenge. A clause inserted into the Bill after the public participation process and signed into law threatens to remove a significant portion of municipalities’ remaining electricity distribution functions.
“SALGA has repeatedly implored both Parliament and the President to reconsider this clause. We hope that with the effective date of the Bill it will exclude this clause. As failure to do so, will undermine the very purpose of our discussion today.”
Municipalities and the Just Energy Transition
SALGA continues to raise concerns over the ERA Bill, which introduced a definition for the reticulation of electricity.
This, they argue, would limit the future scope of municipalities to provide electricity.
In terms of South Africa’s just energy transition ambitions, Stofile said that without the necessary resources, municipalities will be unable to assist on this journey.
“It is not enough to expect local government to follow behind with limited resources and no clear path. 2028 reiterates the need for collaboration and inclusivity. We urge you to bring a bus that allows the local government family to be part of the journey…”
Conference seeks to build solutions with municipalities
In his address to the conference, Electricity and Energy Minister Dr Kgosientsho Ramokgopa, said that as we fashion a South African version of a just energy transition, the country must take account of electricity access (availability and affordability) and energy security.
In terms of energy availability, the Minister said load reduction is affecting “multitudes” of people across South Africa daily.
“This manifests itself downstream in the electricity value chain… at the municipal level. This conversation must help us answer this question and see how best we can resolve it.”
He described the 600% increase in electricity prices since 2006 as untenable and one that has a disproportionate impact on the poor.
“That’s why the President has occasioned this conversation so that we can get it from the horse’s mouth.
Ramokgopa also highlighted capacity.
“Energy security… our ability to manage future demand, allow the economy to grow… while making businesses competitive and also ensuring low-income households have access to affordable energy… the rest of us have electricity that is cost-reflective.”
Parks Tau addresses the pressing issues of power and water security in municipalities.
Municipalities in South Africa and electricity – FAQs
How do municipalities provide electricity to their communities?
Municipalities generate most of their revenue from electricity sales. Those involved in providing services buy electricity from producers (such as Eskom) and then resell the power to households, businesses and other institutions, says Stats SA.
What is the difference between Eskom and a municipality?
Acting mostly as intermediaries, municipalities buy electricity from Eskom and then resell it to businesses, homes and other institutions.
How much money do municipalities owe Eskom?
R347 billion as at the end of March 2024.
Can municipalities generate their own electricity?
In 2020, then Mineral Resources and Energy Minister Gwede Mantashe amended the electricity regulations to allow municipalities to develop or procure their own power.
ESI
The current MFMA further restricts the possibility of shared electricity savings projects which has been beneficial to both National and Provincial Governments. This is a way of optimising private funding, but not under the current local legislation. It is a pity, because there is lots to save and these could be such exciting projects to get involved in.