Electricity distribution problems: infrastructure funding must be reviewed
David Ross, DA Deputy Spokesperson on Energy
6 May 2012
It has come to the attention of the Democratic Alliance (DA) that the Development Bank of Southern Africa (DBSA) will effectively be recapitalised by the South African public. The purpose is to provide financing of more than R110 billion to address infrastructure backlogs and weak institutional capacity in 158 under-resourced municipalities. As the saying goes, though, the road to hell is paved with good intentions.
These municipalities serve 34% of all South Africans but account for 52% of the backlogs. Government must identify appropriate, sustainable means to address these infrastructure backlogs.
I will today be writing to the Treasury’s Chief Director of development finance institutions, Lefentse Radikeledi, to ask him to delineate the readiness of the bank to embark on this funding path. We will also be submitting parliamentary questions to ascertain the terms and conditions under which these loans will be made and how the state will ensure that taxpayers reap a return on their investment.
Our rural electricity distribution network ranks among the most neglected infrastructure in South Africa. Municipalities are failing to fulfil their responsibility to maintain this infrastructure, which means that the DBSA is entering high-risk territory. The country-wide distribution network backlog is currently valued at R26.7 billion, with direct annual distribution losses estimated at anything between R2 billion and R6 billion.
Most problematic, however, is that 84 municipalities are in arrears to Eskom to the tune of R533 million. This means that responsible, paying consumers live under the constant threat of disconnection. If Treasury cannot ensure repayment, what guarantee does the taxpayer have that the DBSA loans will be repaid?
Disconnections and blackouts are symptomatic not only of distribution infrastructure problems (resulting partly from inappropriate financing models), but also a lack of policy coordination at the highest levels of government.
In addition to ensuring that the DBSA has a cogent plan in place, we will also be requesting that the Minister of Energy, Dipuo Peters, urgently bring together the relevant players on this issue (including NERSA, Eskom, COGTA and SALGA) to devise a plan to arrest the current untenable situation.
Throwing money at the problem is never a solution in itself. Government needs to take responsibility and devise a sustainable funding model supported by strong leadership and proper policy coordination.