cities

• Alternative, which is where electricity sales no longer contribute to municipal revenue.
This would require a complete reworking of rates and tariffs, so that all municipal
revenue comes via property rates (or other sources). Requirements include research to
determine how this model could work, risk management to avoid revenue shortfalls or
unintended consequences, and smart meters.
• Combined, which includes a balance of variable and time-of-use tariffs, as well as
differentiated charges that include cost of supply (fixed) and cost of energy (variable). It
should also encourage energy intermediaries and wheeling, 20 with specific wheeling
charges for non-Eskom supply based on KwH distributed (or another basis). System
requirements include a smart grid, energy intermediaries (e.g. Amatola Green Energy), a
good understanding of cost of supply, and incentives to stay connected to the grid.
Cities should engage with National Treasury to refine the set of revenue options, and select
and implement the best alternative.
Conclusion
The largest urban municipalities have improved their financial management and reporting. They are
able to identify corrective actions for wasteful, irregular and unauthorised expenditure, but further
efficiencies can be achieved and cities need to strive to continue improving their fiscal performance.
The three most pressing financial challenges for cities are: there is not enough money to deliver
infrastructure and services at the required level; money is not spent effectively or does not provide
the best value; and the need to balance spending on short-term priorities against longer-term
development strategies.
While cities must explore opportunities to grow revenues, it is equally important for them to
demonstrate that they are spending existing revenues efficiently and effectively. Residents, businesses
and other contributors to city revenues will resist initiatives to expand the cities’ tax-base if the
general perception is that the city wastes funds. Their experience must be that the city is delivering
services of an acceptable standard, infrastructure is aligned to the community’s development priorities,
the administration is efficient, and the standard of governance demonstrates honesty and integrity.
20 Wheeling is the transportation of electric energy (megawatt-hours) from within an electrical grid to an electrical load outside the grid
boundaries. https://en.wikipedia.org/wiki/Wheeling_%28electric_power_transmission%29
272 State of South African Cities Report 2016