FORMULA FOR FAILURE OP-ED: Fenced in — why City Power’s ‘ringfencing’ in Joburg is a 30% revenue grab

City Power's new revenue split in Johannesburg is not a "ringfencing" measure as some may believe, but rather an "arbitrary top-line tax," according to an op-ed piece. The City of Johannesburg (CoJ) will retain 30% of the gross revenue collected from electricity customers, while passing the remaining 70% to City Power within 48 hours. However, this arrangement is far from a solution to the utility's financial struggles.

Most reporting of the new arrangement does not clarify what the 30% is used for, nor does it explain the calculation method or City Power's share. It also fails to address the City Power's internal overdraft with the City, which stood at R19.1 billion as of March 2026. This letter is signed on behalf of an acting CEO, reflecting the frequent turnover in leadership at the utility.

Established in November 2000 as a company, City Power is a separate entity from the CoJ, with its own board, executives, and financial statements. The corporation was created to provide an independent billing, collection, and management of electricity revenue. However, the CoJ has undermined this structure by absorbing billing and collection services, and transferring a significant portion of the revenue to City Power.

The arrangement has been criticized by the Centre for Development and Enterprise (CDE) as "opaque and potentially arbitrary" in a report published on 29 September 2026. The income statement of City Power, which should typically allocate revenue after paying for electricity, staff, and operating costs, has been turned upside-down. City Power now receives 30% of the gross revenue upfront, regardless of its financial performance. This is not a dividend, but rather a "guaranteed 30% levy on gross cash collected."

For a typical municipal electricity distributor in South Africa, bulk purchases from Eskom account for about 70% of the total operating costs. Thus, it is crucial to determine whether the 70% revenue transferred to City Power will be enough to cover Eskom costs, technical and non-technical losses, staff, contractors, materials, maintenance, finance, and network renewal.

Unfortunately, this is not the case. From 2019, the gap between City Power's expenditure and revenue has been widening, resulting in a R4.3-billion deficit by 2025.

This situation has led to an overdraft with the City, growing from R9.98-billion in June 2023 to R19.1-billion by March 2026. Infrastructure backlogs amount to R44.25-billion, while planned maintenance and capital expenditure have repeatedly fallen short of targets. Eskom, the primary electricity supplier, has also suffered from arrears of R5.25-billion paid by City Power in August 2026, with a further R2.3-billion in historic debt remaining.

Customers are impacted by the uncertainty, with increasing numbers of electricity interruptions and longer restoration times.