Johannesburg’s City Power has warned that unless the city increases its budget for bulk electricity purchases from Eskom by at least R4bn, blackouts will return.
The Sunday Times has seen a formal complaint by City Power board chair Makhosini Kharodi to city manager Floyd Brink, calling for an upward adjustment to the R17.5bn allocated for bulk electricity purchases from Eskom.
In the complaint sent to Brink on March 30, Kharodi said City Power spends almost R1.8bn a month on bulk purchases, and had by February already spent more than R14bn of its budget for the current financial year — leaving a narrow margin to sustain supply until the financial year end on June 30.
“City Power is legally obligated to procure bulk electricity from Eskom to maintain supply to residents and businesses. We cannot unilaterally reduce purchases without causing widespread power outages,” Kharodi wrote.
“The bulk purchase overrun is therefore not a discretionary failure — it is a structural funding shortfall that the budget has failed to address.”
The letter lays bare the scale of the crisis, warning that nearly 80% of the annual bulk-electricity budget had been exhausted within eight months. At present usage, the utility projects expenditure will surge past R21bn by year-end — about R3.5bn over budget.
“This constitutes an impending contravention of the Municipal Finance Management Act,” Kharodi said.
Reducing electricity purchases is not an option, he added. “We cannot unilaterally reduce purchases without causing widespread power outages.”
Kharodi said the city’s budget adjustments approved for City Power project a surplus of R1.8bn, but that that figure is “unrealistic and misleading”.
“City Power closed the previous financial year with a net loss of R3.1bn. A turnaround of R4.9bn in a single year is not supported by any operational or structural change of equivalent magnitude. The bulk electricity purchase overrun alone will eliminate any prospect of a surplus.”
This constitutes an impending contravention of the Municipal Finance Management Act.
— Makhosini Kharodi, City Power board chair
The letter warned that the projected R3.5bn overspend on bulk electricity alone would “eliminate any prospect of a surplus,” while rising debt impairment — now R1.4bn — signals worsening revenue collection.
“Presenting a R1.7bn surplus projection in these conditions misrepresents City Power’s true financial position to the council, oversight bodies and the public,” Kharodi said.
On revenue collection, he said collection from City Power customers was not managed by City Power but was a function of the city’s revenue management and shared-services structures. “It is therefore inequitable to reflect deteriorating collections performance as a City Power budget line item when City Power has no operational authority to improve collection rates.
“Any non-achievement of this target must be attributed to the city’s revenue management,” he said, calling for a formal reassignment of accountability.
Compounding the crisis is a significant cut to contracted services, from R2bn to R1.2bn — a move City Power warns will directly undermine its ability to maintain infrastructure and respond to faults.
“This is not discretionary spending — it is the mechanism through which the network is kept operational,” Kharodi said.
He cautioned the reduction would make it impossible to meet the National Treasury’s benchmark of spending at least 8% of asset value on maintenance, a key measure of infrastructure health. The knock-on effect would be felt by residents through more frequent outages and slower response times.
While Kharodi acknowledged that some of the reductions reflected current delivery constraints, he warned that the long-term implications could be severe.
He called for urgent intervention from the city, including a supplementary budget to address the bulk-electricity shortfall, a revision of the surplus projection, and a reassessment of performance targets.
City Power’s annual report says the utility spends more than R1.9bn on salaries. The Sunday Times reported last month that its CEO earns R4.9m a year. High-level executives receive an annual package of R2m-R3m, with benefits including car and cellphone allowances.
The utility’s chair gets an annual package of R210,000, and other directors get R60,000.
City Power spokesperson Isaac Mangena said he was not at liberty to discuss an internal document. “But our financial position has been made public in reports and in council, and the adjustment budget process is a legislated and consultative process that’s approved at council,” he added.
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