City Power and municipality to begin 70-30 revenue split arrangement from 1 October

City Power says ring-fencing of funds will give it greater ability to plan and manage its financial obligations. City Power will soon put most of the revenue it generates directly into its own account. In line with National Treasury’s Trading Services Reform Programme, City Power will ring-fence 70% of payments made to the entity for its dedicated use. City Power stressed that the agreement would not change how residents deal with the entity, stating it would continue to collect customer payments as it currently does. “However, 70% of electricity revenue collected on behalf of City Power will be transferred to City Power within 48 hours of collection, while the City will retain the remaining 30%,” City Power spokesperson Isaac Mangena explained. Strengthening City Power’s ‘ability to plan’ The agreement comes into effect on 1 October and will restrict the municipality’s ability to move funds from one entity’s account to pay another. At the height of Johannesburg’s recent financial crisis, the municipality plugged funding holes with cash from entities who had it to spare, most notably a R3.4 billion raid of Johannesburg Water. Disaster was averted thanks to loans worth roughly R5.6 billion from European development banks, as well as US$1 billion from the Brics-established New Development Bank. Part of the reform programme for municipalities is ring-fencing revenue to promote greater accountability in delivering key services. “Ring-fencing strengthens the link between the revenue generated by the electricity business and City Power’s accountability for the service it provides. “This will strengthen the entity’s ability to plan and manage its financial and operational obligations, including payments to Eskom, contractors and suppliers, procurement of critical materials, maintenance and repairs, and investment in electricity infrastructure,” Mangena stated. More revenue needed However, ring-fencing will not be a silver bullet for the entity’s problems, as the amounts allocated to City Power by the city already exceed what it collects. Finance MMC Loyiso Masuku announced in May that City Power would be allocated R28.3 billion in operating expenditure and R6.7 billion for capital projects for the 2026-27 financial year. City Power had projected revenue of R25.5 billion for the last financial year, but as of May recorded actual collections of R23.1 billion. The entity collected an additional R1 billion from disconnection drives against outstanding accounts, and hopes that tighter controls on illegal connections can help increase revenue. The Organisation Undoing Tax Abuse (Outa) has long called for the ring-fencing of funds and stressed that debt levels should not be allowed to accumulate as they have. “Effective governance requires ongoing financial discipline, transparent revenue management and early regulatory intervention before residents and businesses are placed at risk.” “The immediate crisis may have passed, but Johannesburg’s underlying governance challenges have not. “Residents deserve confidence that electricity revenue will be properly managed, infrastructure will be maintained, and the city will not find itself back in the same position a year from now,” stated Outa Executive Director Advocate Stefanie Fick.