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From 1 October 2026, City Power is formally “ringfenced”. States a letter to consumers dated 21 September 2026 from the energy’s acting CEO, Charles Tlouane. In truth it’s ringfencing in name just.
Check out the letter carefullyand it explains something rather various. The City of Johannesburg (CoJ) will continue gathering every rand that clients spend for electrical energy. It will keep 30% off the top. The staying 70% will be passed to City Power within 48 hours.
That is not ringfencing. It is a very first charge by the investor on the gross earnings of a business that currently can not cover its expenses.
What the letter states– and does not state
The majority of the seven-page letter “assures” consumers that absolutely nothing has actually altered. The billing remains the exact same. The account numbers remain the very same. The payment channels remain the very same. There is no City Power checking account to pay into.
The compound beings in one sentence: “70% of electrical power profits gathered on behalf of City Power will be moved to City Power within 48 hours of collection, while the City of Johannesburg will keep the staying 30%.”
The letter does not state what the 30% is for. It does not state how the figure was determined, or what City Power gets in return. It does not state what ends up being of City Power’s internal overdraft with the City, which supposedly stood at about R19.1-billion on 31 March 2026.
City Power, the letter states, will then handle “its allotment”. The word is exposing. A business makes earnings. A local department gets an allowance.
The letter is signed on behalf of an acting CEO, at an energy that has actually seen continual high turnover in its board, CEO, CFO and COO posts given that 2017.
Ringfenced 26 years back– on paper
City Power is not a local department. It is a business, developed in November 2000, with its own board, its own executives and its own monetary declarations. CoJ is its sole investor.
Producing a ringfenced electrical energy organization was the extremely function of corporatisation. A business was anticipated to bill its clients, gather its earnings, pay its providers, preserve its network and account to its investor for the outcome.
That the City now provides ringfencing as a reform, 26 years later on, is an admission that corporatisation was burrowed long earlier. Billing and collection were pulled into the City. Electrical energy earnings was swept into the community swimming pool, and City Power was restored whatever the City chose it might spare.
A report by the Centre for Development and Enterprise (CDE) entitled Powering Joburg’s Turnaroundreleased on 29 September 2026 in its Johannesburg Matters series, explains the outcome as “a nontransparent and possibly approximate monetary relationship in between the City and City Power”.
The earnings declaration, upside down
A regular electrical power circulation business expenses its clients and banks its profits. From that gross income, it spends for the electrical power that it purchases, its personnel, and its operating and upkeep expenses.
What is left need to cover financing expenses, devaluation and amortisation, and after that tax. From the net surplus after tax, the board maintains what business requires to buy its network and its development. Just then does the investor get a dividend.
The dividend is usually at the bottom line of the earnings declaration. It is paid of any net surplus after kept incomes, and just if there is a surplus.
The CoJ plan turns this upside-down. The investor is paid initially, from the leading line– before Eskom, before incomes, before a single transformer is changed. It is paid whether City Power makes a surplus or a loss. And it is paid in money, within 48 hours.
This is not a dividend. It is an ensured 30% levy on gross money gathered.
The math does not work
For a normal local electrical energy supplier in South Africa, bulk buy from Eskom comprise about 70 %of its overall operating expense.
It for that reason requires to be revealed that the 70 %of the earnings gathered that is moved to City Power will suffice to pay Eskom, City Power’s technical and non-technical losses, personnel, specialists, products, upkeep, financing and network renewal expenses.
It is not enough; something needs to provide. Personnel are paid initially, since they should be paid. What offers is whatever else.
From 2019, an expanding space opened in between City Power’s expense and its earnings. By 2025, the deficit was R4.3-billion, omitting capital grants and contributions.
City Power’s overdraft with the City apparently grew from R9.98-billion in June 2023 to about R19.1-billion by March 2026. Its facilities stockpile is stated to be at R44.25-billion. Planned upkeep and capital investment have actually consistently fallen listed below target.
Eskom has actually been the other casualty. After years of disagreements, City Power’s financial obligations of R5.25-billion to Eskom were apparently settled in August, however there has actually been no main declaration on where the cash originated from. A more R2.3-billion in historical financial obligation stays, in addition to a bank account of R1.86-billion that fell due at the end of August 2026.
Consumers pay the last rate– considerably increasing varieties of forced disruption reports, with repair times substantially longer than standards in many established and establishing nations.
This is the doom loop. Insufficient money implies deferred upkeep, repair and reinvestment in business, which in turn suggest more failures and greater losses. More failures and greater losses suggest even less money.
All of the danger, none of the ways
The plan offers the City certainty. Its 30% shows up whatever occurs. City Power brings whatever else. Eskom tariff boosts, electrical energy theft, non-payment, cable television failures and the expense of obtaining all arrive at the 70% of earnings it gets.
The letter states that higher control over resources “will likewise bring higher obligation”. That is the incorrect method round. If City Power is to be held liable for the results, the plan needs to be revealed to be able to money what City Power is anticipated to provide.
The CDE report cautions of “a product threat of structural insolvency”. A set 30% piece off the leading line does not minimize that danger. It locks it in.
A number without a basis
To be reasonable, in concept, the billing and main earnings collection by the City on behalf of City Power is not always undesirable. A main collection plan might still secure City Power’s income if the guidelines, reconciliation, transfers and oversight were enforceable and transparent.
The criticism, nevertheless, is that the revealed plan offers no showed expense basis for the 30% retention, or guarantee that City Power’s staying money will be appropriate.
CDE’s report keeps in mind that the City devoted to the 70/30 split in November 2025. It discovers that “it is unclear what unbiased aspects the 70/30 split is based upon” and alerts that the split “threats ending up being an approximate guideline instead of a reliable financing plan”.
It needs to be kept in mind that the City might likewise have genuine claims on electrical power earnings, consisting of assistance for indigent families and other local services offered on behalf of City Power.
Those claims ought to be specific, transparent, allocated and budget friendly. They can not be a flat portion, set without referral to what it costs City Power to purchase electrical power, and City Power’s other effectively and wisely sustained expenses to keep the network up and running.
The letter conjures up National Treasury’s Metro Trading Services Reform and funders such as KfW. It is reasonable to ask whether either would acknowledge an unverified, surefire 30% piece off the leading line as ringfencing.
What genuine ringfencing needs
Authentic ringfencing appreciates the structure of the earnings declaration.
Functional top priority: Profits should initially cover bulk electrical energy purchases, staffing, operations, upkeep and financial obligation maintenance.
Property renewal: Staying funds should be assigned to prepared network upkeep and capital expense.
Social commitments: Transparent, allocated allowances ought to money indigent assistance.
Investor return: Just real net surpluses might be dispersed to the town as dividends.
None of this reasons City Power’s own failures– bad management, maladministration, procurement corruption and scams, high technical and non-technical losses, the high turnover of board members and executives, and the deficiency of technical abilities. These need to be repaired too.
The City has actually not shown that even a well-run City Power might fulfill its commitments and sustain its network under the 70/30 plan. On the face of it, the plan would appear to predestine the energy for failure in the very best of scenarios, and these are not the very best of scenarios.
Johannesburg votes on 4 November. Whoever governs the City later on must ditch the 30% piece off the leading line and change it with a correctly corroborated and defensible transfer that City Power can pay for.
Till then, City Power is not ringfenced. It is fenced. DM
Chris Yelland is handling director at EE Business Intelligence.
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