Financial Performance of South African Municipal Electricity Utilities: Addressing Variances Effectively

Electricity trading is a critical revenue source for South African municipalities, enabling cross-subsidisation of basic services, debt repayment, and infrastructure financing, which is essential for sustainable municipal operations. Nevertheless, municipal electricity utilities consistently experience variances between budgeted and actual financial performances due to increasing Eskom bulk tariffs, technical and non-technical losses, a degrading distribution system, billing malpractices, and governance breakdown, thereby threatening service delivery sustainability. This paper examines the financial performance of four major distributors—City of Ekurhuleni, City of Cape Town, City Power (Johannesburg), and City of Tshwane—using a mixed documentary research approach, ensuring comprehensive sectoral analysis. Data sources include audited municipal financial statements, National Energy Regulator of South Africa (NERSA) tariff materials, Auditor-General findings, and national electricity statistics, supplemented by secondary literature on distribution losses and utility governance as well as international best practices. Key performance measures point out that an increase in bulk electricity cost and restricted variations in tariffs have enhanced trading limits, electricity theft, meter tampering, and billing inaccuracies, leading to massive revenue leakages, significantly undermining financial stability. The lack of investment in the maintenance of assets also increases such long-term costs. The paper recommends a set of five strategic interventions to be implemented, such as better revenue management, non-technical loss reduction, recovery of the infrastructure that is ring-fenced, transparent cost-reflective tariffs, and governance and institutional controls. A sequenced implementation framework entails the short-term protection of revenue, the medium-term deployment of smart meters, and the long-term reforms of assets. The findings emphasise that sustainable improvement requires integrating operational reform, technological advancement, financial discipline, and governance enhancement.