The Kimberley Large Business Forum (KLBF), in a sharply-worded letter to the municipal manager and mayor, demands that the Sol Plaatje Municipality meet urgently and undisturbed with them to immediately reverse the decade-long and latest “sky-high, non-competitive and unfair” electricity tariffs for industry and business.
The industries and businesses label these “exorbitant rates” in certain categories as the “highest in the country and foul play by dysfunctional municipal management” to try to plug municipal budget deficits by hundreds of millions of rands.
According to the letter, written by KLBF chairperson Jahn Hohne, Kimberley’s industrial rates for consumption of just under and between 200 kVA and more than 500 kVA, compared against the ten best industrialised municipalities, are about 22% higher.
The KLBF’s members include Ekapa, Hancor, Beefmaster, Solhar, KEW, the Sol Plaatje University, Isicebi, Malu Pork, GWK, Vermeulens Build It, SAW, and Leclovo.
The KLBF argues that the city managers never considered their objections in four submissions about the planned rate increases in the draft budget last year and proposals to energise the business sector with lower, favourable, and attractive rates in the approved budget for the 2024/’25 financial year .
The latest budget left businesses “extremely disappointed at the feeble attempt to make the unusually high” rates more competitive after they have been objecting to it for ten years.
Losses not taken seriously
The “worst is that the municipality does little to stop the losses of R300 million a year that disappears through lost electricity, theft, meters that are bypassed, and defaulters.” Financial losses from lost water are just as perturbing.
According to the letter, after many meetings and submissions, the municipality did not abide to an agreement during a previous technical meeting to reduce the affective average rate across three categories of industrial and business usage.
In the letter to the municipal manager, Thapelo Matlala, the mayor, Kagisho Sonyoni, and other directors, it is demanded that a dedicated meeting be convened with a maximum of five negotiators on each side to discuss the KLBF’s grievances and confirm immediate solutions, “otherwise businesses will close down and unemployment will rise”. Businesses will move to other cities where rates are more favourable.
The latest demand comes after a “disastrous meeting of no effect” on 4 July in the council chamber where the KLBF was just one of many disgruntled parties. It was not an exclusive meeting as expected.
According to Hohne’s letter, it was structured to present why the municipality could not consider further reduction of electricity rates to the larger business sector for the following reasons:
- the municipal-approved budget expenditure is R3 billion, of which special earmarked grants for projects are excluded;
- budgeted income exceeds expenditure, while income deficits are very clear;
- due to the cash-strapped nature of the municipality, the daily cash management requirement is R11 million, but the municipality only receives up to R6 million causing an annual deficit in excess of R1 billion;
- the Eskom monthly bill of R75 million plus the R7 million debt and R2 million interest is a liability of R84 million per month;
- outstanding uncollected debtors owe the municipality R3,8 billion and is growing;
- massive electricity and water losses due to bypassed meters, consumption that is not measured and theft which is a combined loss of between R600 million and R800 million per year and unaccounted for income not included in the budget;
- inappropriate and minor interim cash investments expected to be depleted soon; and
- new digital meters will not correct the above losses, unless the municipality immediately implements supply cuts to non-paying customers.
Money ‘extracted’ from industrial, business sector
Instead of cutting off non-payers such as government departments, businesses and residents’ power supply, money is “extracted” from the industrial and businesses sector through non-competitive tariffs.
According to Hohne’s letter, Hendrik Barnard of Elexpert, who is a consultant for the municipality, has a list of defaulters that the municipality can cut off immediately, but this is not done.
Another claim is that Nersa must be “misinformed about the massive abnormal imbalance” between industrial, smaller commercial consumer and resident tariffs. Nersa’s approval of the tariffs is condemned.
The municipality charges an average of R247 per kVA for the combined consumption in the three industrial categories, while Eskom charges R77 per kVA. At a technical meeting with the municipality, it was agreed that the average tariff for the combined kVA consumption would be reduced by 36% to R150 per kVA. The KLBF’s condition was that further reductions take place over the next three years to stimulate the local industrial and business sector, which has stagnated for the past 20 years.
In the low power consumption season, the municipality charges between R3.50 to R5,77 per kW while they purchase it from Eskom at R1.45 per kW, which is an “unacceptable and disgraceful” markup of between 141% and 298% for industrial and business sector consumers.
The charges are highly unfair towards larger businesses, because rates for smaller businesses are much lower at R2,65 per kW.
Contrary to the agreement on 7 June this year, the municipality then only introduced a partial tariff reduction of 13% in the one category for the highest industrial consumer category.
They demand that the municipality abide by the agreement. Businesspeople are “in no way prepared to wait another 12 months for the next budget because they have been fighting against the high rates for ten years.”
‘Vibrant business sector critical’
The Sol Plaatje Municipality in its response to the KLBF’s sharply worded letter says the concerns are receiving attention.
Thabo Mothibi, municipal spokesperson, says “a vibrant business sector is critical to the economic viability of the municipality. The municipality had lowered electricity tariffs in three categories of industrial users for the current financial year.
“In improving and extending consultations beyond the Integrated Development Plan and budget community consultations, we consulted in the first quarter of the financial year in adopting the Tariff Reference Group. The Northern Cape Chamber of Commerce (Nocci), KLBF, Nersa, and the Treasury were part of the meetings.
“We establishment the Tariff Reference Group two weeks ago.
“The group will measure progress with grievances lodged and suggestions put before the municipality. The improvement of service delivery is critical to Sol Plaatje Municipality to attract investors and ensure the survival of existing businesses.
Mothibi says the municipality submitted and approved the Cost of Supply (Cos) study that was implemented for the first time in the 2023-’24 financial year.
“One key finding from the Cos was the revenue requirements formulae which noted that a 18% subsidy from electricity tariffs resulted in businesses and some other categories being overcharged.
“The Cos ensured that only cost reflective tariffs are proposed to and approved by Nersa with accepted losses of only 10% in the revenue requirement formula.“Cos proposes an 8% subsidy to allow a systematic decrease of overcharged tariff categories over three years. This included businesses and subsidised indigent and residential households with a usage of up to 20 Amps. The municipality proposed a reduction of 1,63% of tariffs in high demand periods and 3,45% in lower demand periods for small businesses with conventional and prepaid meters.”
According to Mothibi they have reduced basic charges for large power users (lower than 200 kVA) with 25,97%, and with 23,59% and 7,7% for user categories between 200 kVA and less than 500 kVA respectively, and a reduction of 14,72% and 19,23% respectively for large power users at above 500 kVA. It includes a reduction of 3,21% in winter off-peak energy charges.
“These reductions effectively lowered billing accounts for these businesses from 1 July 2024,” Mothibi stated.
