PRESENTATION TO SCOPA ON REVENUE SOURCES/ESKOM ACCOUNT – NALEDI LOCAL MUNICIPALITY (NW 392) 13 JUNE 2018

INTRODUCTION Naledi (NW 392) is a category B Municipality situated in the North West Province. The total population and households as per census community survey (2016) data is 68803 and 20692 respectively Eskom and Naledi are both suppliers of electricity within the Naledi area of jurisdiction. Naledi is amongst the highest in terms of money owed to ESKOM, with a total of R274 977 064.55 owed as at May 2018. A cumbersome payment agreement has been entered into.

Bulk Supply - Electricity There are five bulk supply accounts from Eskom. Vryburg Main - 7778082122 Stella Bulk - 6757742615 Naledi Sub - 7264448728 Biesies - 7892659718 FBE - 8818071795

Vryburg Main This is the main supply to Naledi LM. The contracted NMD is 15,4 MVA. The average purchased units is 6126758.22 KWH monthly. The average purchase per month is R 5 669 635.26 This also depends on the season and the peak.

Naledi Sub This is the second supply to Naledi LM at the Low cost housing. The contracted NMD is 2,5 MVA. The average purchased units is 400 358.87 KWH monthly. The average purchase per month is R 411,647.19 This also depends on the season and the peak.

Stella Sub This is the second largest supply to Naledi LM at Stella. The contracted NMD is 1 MVA. The average purchased units is 449 988.82 KWH monthly. The average purchase per month is R 459 308.28 This also depends on the season and the peak.

Free Basic Electricity (FBE) This is the free electricity given monthly to registered Indigents. The Basic units is 50 KWH per household. It is given to all registered households in all areas of Eskom and Municipality supply. The total number of indigents receiving FBE from the municipality is 2184

CHALLENGES No meters to determine municipal usage The tariff is not competitive as cost of supply is too high compared to the tariff. Cost of maintenance too high with Aging infrastructure Fluctuating rate of kwh/units per annum brings instability in terms of pricing Over expenditure on capital projects (MIG and INEP) puts pressure on revenue received.

REMIDIAL ACTIONS Installation of bulk meters at main substation Installation of SMART meters in households Installation of meters to monitor and track municipal usage

ESKOM PAYMENTS - CURRENT Payment of suppliers within 30 days as required by MFMA remains a challenge due to cash flow challenges. Eskom remains our biggest liability with the debt currently at R 274 977 064.55 Naledi Local Municipality is currently in negotiations with Eskom for a payment arrangement which should be finalised by the end of the month May 2018 The ensuing negotiations have seen the current account reduce monthly as follows: Naledi intends to ensure that the current account is maintained to avoid further penalties and maintain the payment arrangement entered into with Eskom.

REVENUE BY SOURCE 11

REVENUE BY SERVICE ELECTRICITY - PREPAID 12

REVENUE BY SERVICE ELECTRICITY - PREPAID 13

REVENUE BY SERVICE RMS-VRYBURG ELECTRICITY - PREPAID 14

REVENUE BY SERVICE RMS-STELLA ELECTRICITY - PREPAID 15

Revenue Management and Cash Flow Challenges and Interventions High Debtors Book due to inaccurate billing Consumers are receiving separate bills for property rates and services Inaccurate water billing due to meters not being read, broken meters Low Collection Rate High Electricity and water Loss Inconsistent and Unreliable IT Culture on non-payment New water meters are being installed, 3500 already installed at Huhudi. Debtors book cleansing exercise is being implemented. Rollout of electricity smart meters in areas that are still using conventional and prepaid meters The debt collection policy has been reviewed to cater for consolidation of consumer accounts Meter reading contract to be terminated and readings be done in-house. Conduct meter audits to determine leakages in water and electricity. Install meters for own consumption determination and recording Gradual investment in ICT infrastructure Introduce consumer education and use all relevant platforms including those provided by other stakeholders. 16

Revenue Management and Cash Flow Challenges and Interventions Outdated and incorrect indigent register Unmetered stands in new extensions-water Ineffective legal collections Dependency on grants Employees and councillors not paying accounts Updated indigent policy. Indigents registration campaign to be embarked upon annually. The District Municipality is assisting with the installation of new meters, once they are done with Huhudi, they will then move to new extensions Legal collection process is under review. Development and implementation of revenue enhancement strategy Payment arrangement made with employees and councillors. For those without one have been notified to do so from June 2018, the total debt of about R3m to be collected within the next 12 months 17

CONCLUSION Naledi Local Municipality has the potential to grow over the long term as it has many strategic opportunities in terms of its location and surrounding economic activities. The Eskom debt places a difficult decision at the end of each month as income is lower than expenses, therefore the Municipality finds itself in a predicament to pay debt instead of servicing the communities as mandated by the Constitution. A cash injection/bailout or better payment agreement between the Municipality and Eskom should be investigated as it would be the most efficient and effective way for the Municipality to strategically turn the situation around and hit the ground running with full service delivery as expected by our communities.

THANK YOU