Good news for R2,800 prepaid electricity ‘tax’

Member of the Mayoral Cabinet (MMC) for Finance in the City of Joburg, Dada Morero, says that the executive in the city will review the R200 per month surcharge for prepaid electricity users in the city, which has caused upheaval and complaints among residents.

The R200 per month surcharge—which is actually R230 after VAT— was implemented at the start of July, catching many residents unaware.

The charge is processed up-front when residents purchase their units for the month, which led to thousands of residents getting less than they bargained for when buying electricity.

Anyone paying R500 to charge would only have received units worth R300, leaving many feeling short-changed.

According to Kabelo Gwamanda, the city mayor, the charge forms part of the city’s funding model, which was approved and passed in the budget.

He said that the charge had been passed after stakeholder engagement, and the city had conducted awareness campaigns to inform residents about it.

He also said that, despite the vitriolic pushback against the charge, it was not going anywhere and that it was “here to stay”.

However, Morero presented a different view on the matter during the city’s 28th Extraordinary Council Meeting on Tuesday (9 July).

The MMC said that the mayoral committee had noted and heard the concerns from communities and civil society organisations about the “R200 availability charge” and that it was willing to review it.

He said the charge was initially brought to the council in 2018, but following the 21019 Covid-19 pandemic, the council resolved to suspend its implementation.

“We stand here as the executive that we are willing to enter the process to look at the charge and its impact on residents and undergo a process to review the amounts,” he said.

“Of course, the reviewal will have to take into consideration the necessary and relevant legislative processes that would have been undertaken to arrive at this amount – but the executive has given a commitment to review the amount.”

Morero did not commit to any timelines for reviewing the amount, nor did he give any indication that it would be set aside in the interim – only that a review process would take place.

Added tax

The R230 surcharge was initially proposed at over R550 in the 2024 budget proposal.

The city has justified the implementation of the charge as a way to align prepaid user prices with conventional electricity user bill.

This is because even though prepaid electricity users only consume electricity on demand, the network still has to ensure that the distribution network has that electricity available.

The city plans to increase these further in the coming years.

“Compared to residential conventional customers, the prepaid customer contribution to network availability cost is still very inadequate and requires a substantial increase in the next three to five years to fully align with the conventional tariff,” it said.

However, energy experts have argued that the way the charges have been implemented is irregular and have hiked prices far beyond the approved rates from Nersa.

The city’s move to split prepaid rates for regular and indigent users has already created a massive cross-subsidising price hike, and the R200 fee on top of this means that some bills have shot up by 45% to 65%.

In addition to this, the plan to shield indigent households from the hikes has also fallen short, with analysts pointing to mismatched indigent household registers, which imply that hundreds of thousands of poor households are not benefiting from lower rates.

The additional tax is also seen as particularly egregious as it was implemented at a time that the city was not even providing full electricity services, with load reduction fully in effect.

According to energy minister that municipalities like the City of Joburg have neglected to maintain their infrastructure, and the practice of overburdening residents with “exponential” tariff hikes to resolve this was not sustainable.

“We have seen that there is little to no investment that has been made (by municipalities) in the replenishing maintenance, upkeep, and protection and modernisation of electricity infrastructure,” he said.

“We are getting to a situation where your lower-to middle class – even your public servants – can no longer afford the cost of electricity in this country,” he said.

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