Opinion: Joburg’s R3.8bn loan will bite ratepayers, The Citizen warns

Johannesburg faces another round of financial pain for households after the city took a R3.8 billion loan from Germany’s state-owned development bank, Kreditanstalt für Wiederaufbau (KfW), to bolster power infrastructure a move The Citizen says will ultimately sting ratepayers.

Why the loan was sought

According to The Citizen, city officials say the loan is urgently needed to reduce a backlog in electrical infrastructure that is estimated at R40 billion. The funds are earmarked for upgrades to bulk infrastructure, substations, medium- and low-voltage networks and metering. The city is quoted as saying:

“the scale of Joburg’s infrastructure requirements cannot be addressed through conventional municipal funding mechanisms alone”.

Who benefits and who pays

The Citizen reports that the R3.8 billion loan will be directed to City Power as the sole beneficiary. The opinion piece argues that, while the German development bank is protected by a guarantee from central government, the financial burden will be felt by ratepayers.

Debt and unpaid accounts

According to The Citizen, the municipality is already heavily indebted the piece says, “If the City of Joburg were an ordinary working person, it would be in debt review” and notes that City Power owes Eskom more than R5 billion in unpaid electricity debt.

Roots of the problem, in The Citizen’s view

The Citizen’s editorial links the city’s deteriorating services and infrastructure to long-term governance choices. It says successive administrations, dominated by the ANC, have failed to save for future maintenance and upgrades. The piece also states that the ANC has allowed a culture of non-payment for municipal services to grow, which The Citizen describes as now being out of control.

What this means going forward

The Citizen frames the KfW loan as a short-term fix that does not address the underlying issues the city faces: a large infrastructure backlog, entrenched non-payment and a history of underinvestment. The editorial warns that, despite central-government guarantees protecting the foreign lender, local ratepayers are likely to bear the cost of addressing the city’s electrical problems.