Statistics. Pic credits: Statistics South Africa
Even though electricity sales dropped by 3.8% it remains the largest income contributor at 25.8% for South African municipalities. Pic credits: Statistics South Africa

In South Africa, between Q4 2014 and Q1 2015 statistics found that municipalities are purchasing and selling less electricity, Statistics South Africa (Stats SA) said on Tuesday.

Joe De Beer, the Director General responsible for Economic Statistics at Stats SA, explained that one of the reasons for the drop in purchases could be a direct result of the challenges that power utility Eskom was experiencing, where generation shortages led to less supply against a high electricity demand, SAnews reported.

In view of load shedding, De Beer stated that: “[… ] the electricity that was generated [… ] meant that municipalities had less electricity to supply and less electricity to sell. You generate less, you sell less.”

Sale of electricity

In monetary terms, the Quarterly Financial Statistics of Municipalities report stated that the purchase of electricity went down from ZAR13,210 million ($1,08 billion) in December 2014 to ZAR12,623 million ($1,03 billion) in March 2015, while the sales also went down from ZAR21,097 million ($1,7 billion) to ZAR20,301 million ($1,6 billion) in the same period.

De Beer said another contributing factor to the declining statistics was that with increasing electricity prices, consumers have opted to seek alternative sources of electricity.

“Electricity is more elastic than what water would be because in households, everybody is trying to find alternative sources of electricity,” he said.

Municipalities buy more water

De Beer said the purchases of water by municipalities went up by 2.8% in the quarters under review, while water sales dropped by 3.7%.

In monetary terms, municipalities spent ZAR3,821 million ($314k) buying water in the quarter ending March 2015 compared to the ZAR3,718 million ($305k) spent in the quarter ending December 2014.

In the same period, the water sales dipped from ZAR7,461 million ($613k) to ZAR7,187 million ($590k).

Among the reasons why more water was purchased, include that it is an essential resource – even if the price was to go up notably, people still need water to survive.

De Beer added: “Water is what economic terms call price elastic. The price of waters changes a lot but it doesn’t really change your behaviour, you still bath, you still drink water, you still water the garden.

“So if the price of water goes up, it will be very difficult for household to change their consumption of water.”

A provincial analysis shows that Gauteng remains the biggest purchaser of water followed by KwaZulu-Natal, North West and the Western Cape.

Grants, subsidies biggest municipal revenue spinners

According to De Beer the biggest contributor to total municipal revenue in the quarter that ended in March 2015 was through grants and subsidies.

Grants and subsidies contributed 27.8% to the municipal total operating income, while electricity sales were the second biggest contributor at 25.8%.

Property rates collected from residents contributed 17.0% to municipal purses, while other income – such as fines, licenses and permits, public contributions and donations – made up 13.6% of the income.

Other income generators include the sales of water (9.1%), sewerage and sanitation (3.9%) and refuse removal (2.8%).