City of Johannesburg Faces Significant Revenue Losses Due to Utility Issues

In the last financial year, between July 2022 and June 2023, the City of Johannesburg (CoJ) faced a substantial financial setback, losing R4.2 billion in electricity and an additional R2.4 billion in water. This total loss of R6.6 billion in trading revenue represents more than 10% of the city’s total revenue of R65 billion during the same period. When compared to its bulk purchases of electricity, water, and sewerage, these losses amount to almost 30%.

Auditor-General’s Report Highlights

The Auditor-General’s report on CoJ’s financials, a comprehensive 20-page document with 101 notes and irregularities, emphasized these losses. The report identified both electricity and water losses as critical issues in the city’s audited financials.

The Magnitude of the Losses

The R6.6 billion loss is substantial and poses a significant challenge to the city’s budget. Although it’s unrealistic to expect zero losses due to unavoidable technical issues like power line losses and water leaks, reducing this figure by half, to R3 billion, could substantially improve the city’s financial health. This amount represents a third of the grants and subsidies received from national and provincial governments and 20% of the property rates income from residents and businesses. It is also equivalent to half of the city’s debtors, highlighting the potential impact on the metro’s budget balance.

Electricity Losses

The city lost nearly 2,900 GWh of electricity in the year, accounting for close to 30% of the bulk units purchased from Eskom and Kelvin Power Station. While this is an improvement from the 3,250 GWh lost in 2022, the financial impact remains unchanged at R4.2 billion due to annual price hikes.

Technical vs. Non-Technical Losses

Technical losses at City Power, estimated at 9%, are higher than normal but are attributed to unavoidable energy dissipation during transmission. The more significant issue lies in “non-technical losses,” which include:

• Theft
• Meter bypasses
• Illegal ‘decalibration’ of meters
• Damaged meters
• Faulty transformers
• Billing errors
• Unmetered customers

These non-technical losses accounted for 21% of the city’s electricity revenue, translating to R2.922 billion.

Water Losses

Water losses are even more severe, though the financial impact is lower due to water’s relatively lower cost. In the year to June 2023, Johannesburg Water reported a ‘non-revenue water’ (NRW) rate of 46.11%, an increase from 44.79% in 2022.

Breakdown of Water Losses

• Unbilled Authorised Consumption (12.7%): Water supplied to informal settlements, deemed consumption areas, and network maintenance.
• Physical and Commercial Losses (33%): This includes physical leaks and commercial losses like illegal connections and billing issues.

Nearly 24.05% of bulk water is lost due to physical leaks, while commercial losses account for 9.35%.

Industry Benchmarks and Performance

The South African Water Research Commission classifies NRW levels as follows:

• <15%: Very good performance
• 15%-30%: Good performance
• 30%-40%: Average performance
• 40%-50%: Poor performance
• >50%: Very poor performance

Joburg Water aims to maintain NRW levels between 30% and 40%, which is considered ‘average’ performance, but has struggled to achieve this target, with the situation deteriorating.

Strategic Initiatives and Community Engagement

Despite these challenges, the City of Johannesburg continues to prioritize affordability and support for its vulnerable residents. The city’s low property rates increase of 3.8% for the 2024/25 financial year, combined with subsidies for pensioners, unemployed individuals, and other indigent residents, underscores its commitment to social equity.

An independent Service Delivery Satisfaction Survey for 2022/2023 reported that 61% of residents are generally satisfied with the services they receive, reflecting the city’s ongoing efforts to improve service delivery despite financial constraints.

Conclusion

The City of Johannesburg’s significant revenue losses from electricity and water highlight the urgent need for strategic interventions to reduce non-technical losses and improve infrastructure efficiency. Addressing these issues could enhance the city’s financial stability and ensure the sustainability of essential services for all residents.