Hello and welcome to the So What podcast, in which political economic analyst JP Landman
discusses the issues uppermost in the minds of South Africans. You can find a written
version of this content on JP's website, jplandman.co.za. I am Ruda Landman and I am your host.
These first few recordings were done at our dining room table, but we will soon be moving
into a studio. Hello, this is an audio recording that goes
with my note for March, dated 31 March 2023, with the heading, Electricity Distribution,
a glimpse of what the future could be. My sense is that South Africans are utterly
exhausted, and so to give us all a break, I have decided this month to do something
different. I am not going to quote data and research, we are going to tell you a real
life story, coming from the ground up, which I think is also telling us something about
the future. It is a story of a father, a mother, the two sons, the Bosch family, who have developed
a very practical example of how electricity distribution in South Africa will change over
the next few years, and Ruda will tell us the story of the family.
The story starts 30 years ago, when the engineer father started working on the maintenance
and administration of electricity distribution systems, as ESCOM was embarking on its mass
electrification programme of 350,000 houses a year. ESCOM made losses on these programmes,
and then it outsourced the management of these to private companies.
The father in our story began a family business, contracting his services to ESCOM in Hammans
Crown, north of Pretoria. The losses were turned around, and the services became profitable.
Why? What was the secret of their success? Well, firstly, they involved local communities.
No, not local politicians, their real local community. The Chabin, funeral parlour owners,
the taxi bosses and spaza shop owners, block by block, those who were leaders in that area,
a chief or a chief son, a church leader or a community organiser, anyone of stature or
credibility was contacted, brought into the circle. These community members received nothing,
and all they were asked to do was to support the delivery of electricity services in their
community. Secondly, the company rendered the service. If the power went out, they got
there and fixed it, no matter the time of day. The mother told us that one night in
the early 90s, the couple's eldest son, who was a mere baby, was sleeping in the bucky,
while she was holding a searchlight for dad, who was up on a pole in Hammans Crown, to
attend to an electricity outage. Four men walked up with AK-47s. Remember, this was
the early 90s. It was still quasi civil war back then. She dropped a light, introduced
herself to the four men, shook their hands and explained that they were busy fixing the
power. The four guys laughed, wished them well and went on their way. The power was
restored. The result of community buy-in and service delivery was that households paid
for their power. Safety of equipment was minimal, and company vehicles weren't stolen or hijacked.
Well, not quite true. One brand new Nissan bucky was stolen before it had company signage
on it. Word went out, the bucky was recovered. As one door closed, another one opened. When
demands for a cut emerged in 1998, the family didn't renew their Scom contract and moved
on to private sector work. They managed the distribution of electricity for a bank across
all its retail properties. Later, they did the same for a large property company. It
was before the days of REITs. It proved to be a very successful enterprise, saving the
bank and the landlords many millions. It proved there was legitimate money to be made in the
administration and management of electricity distribution. That is the opportunity the
family saw and exploited, so much so that their company was sold for a tidy sum of money.
They then had the option to emigrate Australia, New Zealand, or they could put the money into
electricity distribution infrastructure in the Free State. They chose the latter, helping
local government. They made a very promising start in the Free State in Mafube, a municipality
covering Frankfurt, Cornelia, Falise and Tueling in the North Eastern Free State. Mafube municipality
had to pay an average of five million rand a month to Scom. They had an average income
of only 1.7 million rand a month. Metres were not installed or repaired and in numerous
cases simply bypassed or just partially billed. There was no money for petrol or diesel to
go out and attend to problems and there was no capital for replacement parts or equipment.
So Mafube municipality contracted the family business to take over electricity distribution
in the four small towns. About 100 million rand was invested in infrastructure. Staff
were trained and retrained to the desired standards. YouTube, they say, helped a lot.
And custom-made technology was deployed. Long story short, there are 12,000 clients, households
and businesses, and only 65 have been cut off over 12 years for non-payment and the
subsequent debt written off. Let's say that again. Out of 12,000 clients, only 65 were
cut off over 12 years. Javier, it sounds as if the principle is actually quite simple.
If people receive effective services and are treated decently, they pay for the service,
yeah? Yes, absolutely. That's exactly what it is. And take a step back, Rudan, just think
about the basics. Who is going to do the distribution of electricity better? A specialized company
that focuses only on that and nothing else, or a municipality which must deal with political
patronage, with conflicting priorities and a whole different set of issues. It's quite
clear that the specialized company focusing on distributions will actually do it better.
They will train the people better. They will focus on controlling the debtors. They will
focus on getting the cash in. And they will focus on giving a good service because their
lifeblood depends on it. No service, no income. It's as simple as that. Now, one can say that
the municipality, in theory, can do it as well. Yes, in theory they can. But in practice,
we know that most do not. How has this played out in Mafube? Well, for Mafube, the story
has really gone very, very well. The municipality no longer has the outflow that they used to
have with providing electricity. In fact, they're now receiving a royalty from the Bosch
family. The Bosch family is using the municipality's license, distribution license, and they pay
a small royalty in that. So there's an income for the municipality. They no longer have
to worry about that side of life. They can carry on with providing other services to
the community. And what has happened in the economy of the town is simply unreal. They've
organized the distribution of electricity in such a way that the waterworks and the
sanitation works are not cut off when there is national load shedding. Those operations
carry on. So water and sanitation delivery is automatically better. Because there's a
small solar farm also in the operation, they save about 17% of what is required by ESCOM
when there's load shedding. They can do 17% less load shedding. A big agricultural co-op
in the town, you know, that's rural area, it's all about agriculture. A big agricultural
co-op has decided as a result of the reliability of electricity to invest more in the town
and they've created 120 jobs. Property prices are rising in the towns of Mafube in comparison
to other towns and small businesses flourishing. So it has been a really a good new story.
Because a late friend of ours would have said, what is not alike? Have the Bosch's expanded
to neighboring towns? Yes, they did to Harris-Smith, which is in the Eastern Free State. That story
didn't end too well, because as happened many years earlier, there was again a demand for
a cut and they then decided they're not dealing with that. So they withdrew from the town.
And the result is that Harris-Smith today is the biggest single debtor of ESCOM that
exists while Mafube owes no money to ESCOM. What is also interesting is that the ANC in
the 2021 local government elections lost control of Harris-Smith to a local organization, but
in Mafube they retained control of the council. So there is political advantage in doing proper
servicing. Future plans, I know that the family is constantly planning new stuff. Yes, yes,
they can't sit still. They have to always try new things. What they're working on at the moment is
two rather large solar farms to supply more electricity to town and buy less from ESCOM.
What is unique about that is they want to actually over time sell the shareholding in those two solar
farms to the electricity consumers of Mafube. So if you pay your electricity bill for a month,
say 100 rand, then you have the option to pay 105 or 110 rand and that extra five or 10 rand
will go towards buying shares in the two solar plants. And this is not just the big farms and
the industries, it's also private people that they want to pull in like this. Absolutely. Remember
that's where they started. From the beginning they involved the local community, they involve the
local citizens and this is an extension of that principle. They now want to take these people who
are consumers of electricity, even if they're a small consumer of electricity, and convert them
into owners. So from consumers to being owners. In fact they are looking at the moment and if any of
our listeners or readers can help, please contact us. They're looking for a company that gives a
specialized service in administering the collection of three rand here, five rand there, six rand there,
which then goes towards buying shares in the solar farm. So if there's anybody out there who knows
about a company doing that, please please help out. Your conclusions? So what? Well I think the first
point is that electricity distribution doesn't have to be a drain on the Fiskus. That is very
very clear. It was a drain in Mafube, it is a drain in many other municipalities. The way that the
the Bosch family is doing this, it doesn't have to be a drain. With proper management, new technology,
proper communication with the community, you can actually turn it around into a profitable enterprise
which benefits everybody, also the local municipality and politicians.
What we also clearly see is that a localized operator with roots in the town, with links to
the community, free from political interference, can actually get rid of corruption in electricity
distribution, of which we know there is a lot, run a clean service and give a proper service to the
town. That is clearly the second lesson that has come out. I think the biggest lesson of all is
citizens are willing to pay for electricity. They're willing to pay for services. If you treat them
decently, you give a proper service 24 hours a day, seven days a week, people will step up and
and take that responsibility and pay for it. The story that South Africans don't want to pay for
services, it is certainly not generally applicable. I think that's an important point to
make. But then you must be willing to put a ladder against a pole at 9.30 in the evening,
with your baby in the car. Absolutely, even if people walk around with rifles or guns,
that's what you have to do and it has worked. That is very, very clear. The other point that I think
comes out clearly is that when you involve a private company in distribution, that company
will put up the capital for a proper system, for enough spare parts, for enough equipment,
like proper meter readers and so on and so forth. The family has spent a hundred million rand
in Mafube. That's a lot of money coming from a private company. If they could have spent a hundred
million rand, the municipality would have had to cough the capital. Now it's no longer necessary.
You take the money from a private sector and then you allow them to enter the turn on that money.
I think the last point that I want to make is that at the moment all our attention is focused on
load shedding. I don't have to tell you every day, all day, that is uppermost in people's minds.
But the next area of problem will be electricity distribution. This model that we have here is a
pointer of how it can be organized, how it can be done. It is not necessary to walk blind into a new
crisis. It can be managed. Thank you very much. You started. You said hello, so you must say goodbye.
Thank you for your time. Thank you for listening and we wish you a very happy Easter time.
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