The budget speech of 2023 will go down as one of the most focused but pungent speeches that may be delivered in the history of democratic South Africa.
When a country is facing a monumental threat that could wipe away its hard-won gains and competitive advantage that it has enjoyed for so many decades, one and sundry will have an opinion.
In the multiplicity of opinions, the voices that may bring the solutions could be drowned due to fearful loud voices. The big crisis that we are facing is not load shedding but the pervasive impact that it is having on all aspects of the South African economy.
Having plied my skills in local government for some time, I have come to appreciate the micro and macro issues that drive this sphere both positively and negatively.
One of the macro issues is the model that local government was premised upon, of being a “business” within the government value chain with a view of generating its own revenue, was either flawed or ambitious. Municipalities across the country are facing the reality that has been faced by ordinary businesses. Businesses are in a tough cycle of decline in their sales due to a waning demand for their services driven largely by a deteriorating economy.
Municipalities too are in a downward cycle, where they accumulate significant debtors’ books from being owed by their customers for services rendered.
Their services are losing appeal with their customers purely because the supply is not stable, just like a business that is not able to satisfy the demand from its customers.
Electricity has been from the existence of municipalities an important revenue earner for a municipality and, in fact, it was the number one revenue item that could subsidise other services.
This has changed overnight, where property rates tax is the largest revenue earner for municipalities. So, the business model of municipalities is unravelling and bringing its current business model under the spotlight.
Eskom is the sole generator and carrier of electricity with the municipality playing a joint role of distribution to the end user. Simply, the fortunes of municipalities are intricately intertwined with that of Eskom.
Now that Eskom is faltering, municipalities are following suit and will most probably experience the same problems as their partner and supplier. Yes, municipalities have other problems that have been chronicled extensively and comprehensively but I shall not dwell on them to mention that they are serious.
The minister of finance in his address narrated a convincing story of how Eskom must be supported and be fixed so that the rest of the “things” can be put right. I must say, I buy this story and I probably bought it when the president mentioned that “Eskom is too big to fail”. We must put our energy into fixing Eskom, but not all of it. Municipalities, especially those that supply electricity, must also be fixed together with Eskom. After all, their fortunes and misfortunes are tied together! While there is a consensus that Eskom is a priority, we must also prioritise its “siblings” and not halt the progress of those tied to it.
Practically, the decline in the electricity revenue within municipalities is not difficult to understand. Let me attempt to simplify it. Municipalities sell a product that is supplied by Eskom and in recent times, the product has not been fully available, thus municipalities cannot sell it and then they lose the revenue that emanates from this product.
Perhaps if there was another supplier. This could ameliorate the shortage or if there were alternative sources of the product, municipalities could be less impacted.
The lack of electricity supply at crucial moments means that municipalities lose revenue but remain with fixed costs. By the same token, businesses are not able to light up their premises to carry out their production, and they too lose their revenue.
We as residents lose out too on normal family life and have to improvise means of having light and access to the internet to support our children in completing their schoolwork.
Waiting for Eskom to be fixed cannot be the only solution to solving the current crisis that we are facing. Municipalities are autonomous organs of the state and have a constitutional duty to function.
Therefore, they should not be made to wait in a queue. The 2023/24 division of revenue act made available an additional R14.3 billion made up of R8.1 billion of equitable share and R6.2 billion of conditional grants.
Perhaps the grants should be repurposed to fund municipalities towards propping up their electricity revenue that is lost due to load shedding. If Eskom receives additional money to buy diesel, then municipalities should be allocated money to build microgrids to generate and sell electricity.
Building micro grids can take the pressure off Eskom and allow it space to undertake the fixing programme.
This approach of fixing Eskom together with the other elements that are closely related to it should be embraced instead of solely focusing on one piece of the puzzle.
It is not the only piece!
This may shed the lingering pungent nature of the 2023 budget speech and will no doubt bring in much-needed buoyancy back to the municipalities, businesses and many residences that are gloomy from being in the dark!
* Miyelani Holeni is the Group Chief Advisor for Ntiyiso Consulting Group.