Free Basic Services – JoburgCAN Statement

Image: OUTA/JoburgCAN

 

Is the City of Johannesburg underspending on free basic services to redirect funds?

A report finds that the City of Johannesburg gets enough national funding to support 1.1 million indigent households, but only 12% receive it. So where is the money?

JoburgCAN, an initiative of OUTA, in partnership with the Public Affairs Research Institute (PARI), has released a report on the state of Free Basic Services (FBS) in the City of Johannesburg (COJ) and its impact on service delivery.

The City receives R7.572 billion as its equitable share grant in 2024/25, primarily intended to fund basic services for indigent households.

City documents assessed by JoburgCAN – including the Joburg budget and documents obtained in Promotion of Access to Information Act (PAIA) applications – show that City Power had 45 000 indigents registered during 2022/23, including 6 106 indigents in the Eskom supply areas of the City. The City’s budget for 2024/25 said there are 130 000 households on the indigent register, with 55 563 households receiving 50kWh of free electricity every month. All households receive 6 kilolitres (kl) of free water every month according to municipal bills, which includes those on the indigent register, but this information does not seem to be disclosed on the City’s financial documents.

At the most generous interpretation, according to the Auditor General’s findings, the City is providing 140 329 households with a FBS package, costed by National Treasury for 2024/25 at R567.12 per household per month, a total cost to the City of R884.707 million. This is less than 12% of the City’s equitable share grant.

“It can be assumed that the COJ is deliberately keeping the indigent register numbers low to redirect that grant to the City’s budget, as they have full discretion on how the grant is distributed because the Equitable Share Grant is non-discretional” says Julia Fish, Regional Manager for JoburgCAN. “The claims that residents unable to afford the new prepaid R230 tariff network fee would be exempt and protected by the indigent register were grossly overstated, as many who qualify for FBS are left in the dark.”

The FBS policy aims to provide a lifeline to the poorest households by offering a limited amount of essential services each month: 50kWh of electricity, 6kl of water, and basic sanitation options. However, research indicates that these provisions are inadequate to meet the actual needs of most households. For instance, the minimum basic requirement for electricity is estimated at 200kWh per month, and for water, it is 10kl — both significantly higher than the current allowances. The FBS, therefore, only partially subsidises households’ needs and fails to meet the broader goal of providing universal, affordable access to these critical services. The City allocates FBS on a sliding income scale, with the lowest income bracket intended to receive full benefits, but those earning at the top threshold of R6200 get only 10kwh of electricity. It is unclear if they would qualify for an exemption of the prepaid service fee.

“As of 2024, the monetary value of the FBS package is R567.12 per month, with R332 attributed to electricity and water. If households do not receive these services for free, they are forced to cover the costs from their already strained incomes, further exacerbating their financial difficulties,” says Dr Tracy Ledger, Energy Transition Programme Lead at PARI.

“As South Africa strives for social and economic equity, the importance of local government in delivering essential services to the most vulnerable members of our society cannot be overstated,” says Julius Kleynhans, Executive Manager of Local Government at OUTA. “The FBS programme is key in our efforts to uplift those living in poverty by providing them with the basic utilities needed to live with dignity. This subsidy is funded directly by the national government through tax revenues received from hardworking citizens. However, as our report reveals, the gap between policy and implementation remains a serious challenge,” says Kleynhans.

National policy outlines what national government funds to municipalities through the equitable share grant. In 2024/25, National Treasury allocates funding for 11.2 million indigent households to receive FBS via this mechanism. The subsidy covers bulk costs and contributes to municipal administration costs. Indigent households must access this assistance through their municipalities, by registering as indigents.”

“The findings presented here are not just numbers on a page — they represent the real and pressing needs of millions of South Africans,” Kleynhans says. “The disparity between the resources allocated to support our poorest citizens and the actual delivery of these services is a stark reminder that we must do more to ensure that government policies reach those they are intended to serve. In fact, the effective execution of these grants to benefit those in need may well determine the outcome of the next local elections in 2026.”

“In effect, the lack of a fair and representative FBS registry means money is being taken out of the food baskets of families. If we are serious about reducing illegal connections, obtaining stable energy infrastructure, and reducing debt owed to the City, we must provide the basic allocations as intended,” says Fish. “FBS is more than a line to be dragged out during elections. It represents the material growth and investment in our people and communities, and money for improving infrastructure access as enshrined in the constitution. Denying access to the registry is tax abuse,” Fish emphasises.

“The financial distress resulting from the lack of FBS leads to an increase in illegal connections to municipal services, which in turn causes damage to infrastructure. The COJ indigent policy, by denying households of FBS, directly contributes to these issues. If the City were to allocate its equitable share appropriately, it could subsidise 1 112 580 households per month, significantly alleviating poverty, improving living conditions and reducing the City’s bad debtors book,” says Ledger.

JoburgCAN has embarked on a registration drive and education campaign to assist residents in the COJ to see if they qualify for FBS, and to guide them in the application process.

“National Treasury and Parliament must urgently address the systemic issues within the FBS programme. A national set of criteria for indigent registration should be established to ensure consistency and fairness across municipalities. This would prevent the arbitrary exclusion of households in need and promote equitable access to FBS,” says Ledger.

Fish adds that national government must apply greater oversight to these grants to ensure they are administered fairly. “Allocations should be reviewed to meet the true needs and consumption of impoverished households, thereby reducing their financial burden.  Transparency and accountability are essential, from the unnecessarily burdensome application process – which requires renewal every six months – to the number of households receiving services. It shouldn’t take a PAIA application to reveal the truth about a city’s grant spending.”

According to Fish, JoburgCAN has stressed that the City needs to reprioritise spending since submitting a written response to the COJ budget in April. “To attempt to recoup costs from absorbing the FBS grant rather than show restraint on department spending is immoral,” Fish says.

JoburgCAN requested clarity from the COJ and the executive mayor’s office on the discrepancy between figures obtained from National Treasury, the Office of the Auditor General and the COJ Annual Report. The City offered that “the discrepancy arises due to different definitions of indigent households. National Treasury’s number is based on the broader equitable share calculation, while the City’s IDP focuses specifically on households living below the lower-bound poverty line. The City’s Expanded Social Package (ESP) operates using a means-tested system based on the COJ Poverty Index, which provides more targeted assistance. The City offers assistance to qualifying individuals based on poverty scores. Households receive subsidies for water, electricity, and rates depending on their poverty score band”. The COJ offered bands up to 30kwh of electricity, not the maximum of 50kwh in their response which is not in line with their Extended Social Package policy. A further request for actual indigent register figures and engagement with the service team that manages FBS have not yielded a response.

The numbers

What we found in the City of Joburg’s 2024/25 budget

• 130 000 households on the indigent register. (See footnote 1 below)
• All 2 139 271 households on municipal water get 6kl of free basic water every month. (2)
• 55 563 households get 50kWh of free electricity every month. The budget claims this costs R2.897bn in 2024/25 (3), which is not believable (that would be R4 345 per household per month) (4).
• An unspecified number of households get free refuse removal at a cost of R51m (5). At National Treasury estimates of R107.10 per household per month, it would be about 475 592 households.
• There is no information on free basic sanitation.
• “Free services” are 41% of the equitable share (down from 55% in 2023/24) and 3.7% of operating revenue (3.5% in 2023/24) (6).

What we found in City’s Power’s application to Nersa

City Power provided a Cost of Supply Study for 2022/23 to the National Energy Regulator (Nersa) and D-Forms, in the electricity price increase application for 2024/25. The information all related to 2022/23.

The information includes:

• There are 45 000 registered indigent households in the City of Joburg, serviced by City Power and Eskom (7).
• 6 106 customers together receive 3 663 719kWh of free basic electricity (this is 50kWh/month per customer). This appears to be the municipal subsidy for Eskom direct customers, which the City manages (8).
• City Power paid Eskom R4.206m in 2022/23 for Eskom customers in the Joburg area who receive free basic electricity (9).
• City Power has 119 355 domestic prepaid customers and 99 080 domestic conventional customers (10). Of the domestic prepaid customers, 10 907 were on the prepaid low tariff and the rest on prepaid high (11).
• City Power records 107 358 prepayment vending stations (12).
• 28% of energy was lost in 2022/23 (13).
• City Power connected 1 251 more households in 2022/23 at a cost of R82.087m (this would be a cost of more than R65 600 per household) (14).
• There are 1 179 customers on the reseller tariff (15).
• There are 75 000 households serviced by the resellers (16).
• City Power did not record any revenue from the equitable share as the subsidy for free basic electricity (17).
• In 2023/24, revenue from sales was R21.841 billion (R16.632 billion in 2022/23), against expenses of R22.296 billion )R19.350 billion in 2022/23) which included R16.403 billion (R14.112 billion in 2022/23) buying bulk electricity (18).

Footnotes

1. COJ budget 2024/25, “Free Basic Services: Basic Social Services Package”, Budget Book p97
2. COJ budget 2024/25, table A10 Basic Service Delivery Measurement
3. COJ budget 2024/25, table A10 Basic Service Delivery Measurement: Lists this as a cost of R2 879 393 000 for providing indigent households with 50kWh per household per month
4. COJ budget 2024/25, table A10 Basic Service Delivery Measurement, & table SA1 Supporting detail
5. COJ budget 2024/25, table A10 Basic Service Delivery Measurement, & table SA1 Supporting detail
6. COJ budget 2024/25, table SA10 Funding Measurement
7. City Power, D-Forms July 2023: Non-financial information
8. City Power, Updated City Power Cost of Supply Study for FY2223 (Base Year). Table 1
9. City Power, D-Forms July 2023: Financial information
10. City Power, Updated City Power Cost of Supply Study for FY2223 (Base Year). Table 1
11. City Power, information provided in PAIA application, 12 August 2024.
12. City Power, D-Forms July 2023: Non-financial information.
13. City Power, Updated City Power Cost of Supply Study for FY2223 (Base Year)
14. City Power, D-Forms July 2023: Non-financial information.
15. City Power, Updated City Power Cost of Supply Study for FY2223 (Base Year). Table 1
16. City Power, D-Forms July 2023: Non-financial information
17. City Power, D-Forms July 2023: Financial information
18. City Power, D-Forms July 2023: Financial information (sheet D1-Statement of Financial Performance)

More information
A soundclip with comment by Julia Fish, JoburgCAN Regional Manager, is here.
The JoburgCAN/PARI report on free basic services in the City of Johannesburg is here.
More on the JoburgCAN campaign to encourage access to free basic services is here.

 

Spokesperson on this issue:

Julius Kleynhans OUTA Executive Manager: Local Government
082 829 9182 julius.kleynhans@outa.co.za

Julia Fish JoburgCAN Regional Manager
078 411 8475 julia.fish@joburgcan.org.za

 

Media queries:

Ibanathi Ngcobo
OUTA Brand Manager for WaterCAN, JoburgCAN, CAN & Link
060 302 4596 iba.ngcobo@outa.co.za

Samantha van Nispen
OUTA Head of Marketing & Communications
082 885 6569 samantha.vannispen@outa.co.za