WeeklySA_AdminALLEVIATION: Integrating the electricity payment system into RDP housing scheme could radically ease the strain, according to University of Cape Town study…
By Monk Nkomo
Thousands of vulnerable and impoverished South Africans have been plunged into financial misery due to, amongst others, the ever increasing electricity tariff increases and the usage of prepaid meters with many households expected to experience hunger or food security.
A doctoral thesis by Isaac Kwamena Nunoo , who graduated this week with a PH.D in Economics from the University of Cape Town’s (UCT) School of Economics, has highlighted the crucial role of electricity in enhancing household welfare in Ghana and South Africa.
The thesis explored the impact of electricity and fuel usage in home-based enterprises on household welfare. It found that both electricity and fuel were important for increasing income from non-farm enterprises. However, the thesis found that the difference in the choice between these two inputs was negligible.
The study delineated the challenges faced by vulnerable groups and proposed potential solutions to improve the situation for impoverished households using prepaid metering systems. Notably, the combined use of prepaid meters with the free basic electricity programme, could alleviate energy poverty. The study suggested that integrating prepaid meters with the Reconstruction and Development Programme housing scheme could serve as an effective pro-poor policy to reduce energy poverty.
“Low-income households often lack sufficient cash savings or a steady cash flow, making it challenging to cover essential expenses like food, electricity and other necessities. When these households prioritise paying for electricity, it reduces the remaining income available for food, leading to a higher likelihood of food insecurity. This financial strain forces difficult trade-offs, highlighting the tough choices these families must make between maintaining basic utilities and ensuring adequate nutrition.”
Nunoos’s research also examined the connection between prepaid electricity meter systems and food insecurity. The results indicated that households using prepaid meters were more likely to experience hunger or food insecurity.
The presence of prepaid meters was associated with a 3.9% higher likelihood of overall household hunger, as well as a 4.7% and 4.4% higher likelihood of hunger among adults and children, respectively.
Titled “The heterogeneous impacts of energy type and metering systems on household welfare: insights from Ghana and South Africa”, the thesis also assessed the impact of prepaid electricity meter systems on energy poverty in South Africa. It revealed that households using prepaid meters were 3.35% more likely to experience energy poverty compared to those with post-paid systems. The shift to prepaid meters also resulted in increased dependence on unclean energy sources for cooking and heating, with a 5.7% increase in biomass use for cooking, 10.9% for space heating and 4.3% for room heating.
Nunoo’s findings coincided with the recent decision by the City of Johannesburg which announced the implementation of a R200 prepaid electricity surcharge per household from July 1 this year – a decision which has outraged local communities. The municipality said the amount was critical to its 2023-2024 financial year budget. The council passed an amount of R83 billion through its funding model which was critical for, amongst others, the maintenance of its electricity distribution infrastructure.
The Organisation Undoing Tax Abuse (OUTA), called on the municipality to scrap this R200 service charge and warned that it could drive some community members to resort to illegal electricity connections as a desperate measure to avoid the insurmountable expenses.
‘’ This charge will have significant financial repercussions on our communities especially those who are most vulnerable. It effectively penalises those households for their efforts to control and reduce their electricity consumption and undermined the principles of fairness and equity,’’ said Julius Kleynhans, Executive Manager for Local Government at OUTA.
Nunoo said the incidence of energy poverty associated with prepaid metering systems often arose due to fuel stacking, where households relied on multiple energy sources. When prepaid metering systems limit electricity consumption, households were forced to use unclean energy sources, such as biomass for cooking and heating.
“This reliance on unclean energy is a clear indicator of energy poverty as it highlights the inability to access and afford cleaner, more reliable energy sources.” The study underscored that vulnerable or impoverished South African groups were the most affected by energy poverty when using prepaid meters.
Nunoo added : “The well-insulated walls help reduce electricity consumption and energy-efficient appliances further decrease energy use, making electricity purchases more cost effective and rational when compared to unclean energy sources. This approach highlights the benefits of combining energy-efficient infrastructure with prepaid meters to lower overall energy costs and encourage the use of cleaner energy.”
According to Nunoo, the lack of significant difference between electricity and other fuels suggested that external and environmental factors should be considered when choosing an energy source. “Electricity is often preferable to alternative fuels due to its lower environmental impact and associated health implications. This underscores the importance of promoting electrification for domestic and productive uses.”
The findings clarified the ongoing debate regarding the most beneficial choice of energy for household improvement. Considering how prepaid electricity can help explain household welfare problems such as food insecurity and energy poverty, the research prompted academics and policymakers to revisit policies that may not have considered their effects on vulnerable populations and could potentially hinder the adoption and transition to clean energy.
“This analysis not only highlights the unintended consequences of certain public policies but also demonstrates how implementing relevant complementary policies can mitigate the identified negative impacts. By addressing these issues holistically, policymakers can better manage the challenges and ensure that the intended benefits of these policies are fully realised, while minimising any adverse effects.
Ensuring that public policy achieves its intended purposes will lead to the acceptance of good initiatives and benefit everyone, including vulnerable populations and policymakers.’’
