Non-payment culture and the financial performance of urban electricity utilities in South Africa

Abstract

Non-payment for services continues to challenge sustainability in municipal service delivery across South Africa. Literature provides that the culture of non-payment stems from the apartheid era where mass civil disobedience manifested through boycotting the payment of rates. This study examines the impact of the non-payment culture on municipal financial performance in South Africa. Panel data for 28 municipalities for the years 2005–19 is used, and the random-effects model is employed to estimate the relationship between municipal financial performance and non-payment. Results confirm that non-payment has a negative impact on financial performance. For every R1000 increase in bad debts written off, financial performance is reduced by R291. Further, grants from the national government, the number of consumers, and the number of household units receiving free basic electricity positively affect financial performance. These revelations warrant the need for more innovative approaches that transform non-payment into a culture of payment.