NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 27, 2006

A FEASIBILITY study has found that the majority of around 14 000 households in Windhoek’s informal settlements will not be able to pay for either electricity connections or consumption if this were to be provided to them.

The study commissioned by the City in 46 informal settlements found that the residents wanted a high level of electrical infrastructure, which was beyond their means to pay for.

The analysis of the households’ income revealed that most households could not even cover their basic expenses with their monthly income.

Only a minority of households would have a surplus amount to pay for municipal services.

Electricity cannot be made more affordable because the City needs to recover the cost of expanding the power grid to these areas.

The lack of electricity or even public lighting in low-income areas has led to illegal and dangerous connections.

The desperation for electricity has meant that illegal wiring is often replaced within a day of being removed by City officials.

Illegal connections have already caused deaths and pose a constant threat of shack fires within the informal settlements.

Over the last five years, the City has established many new neighbourhoods without any public lighting, creating dark and unsafe places that have been criticised by councillors and communities.

Especially in poorer neighbourhoods, the City has received complaints that dark streets promote violent crime such as rape, murder and theft.

Burmeister and Partners were commissioned to determine whether the City would be able to recoup the costs of providing electricity to low-income consumers.

The report found that no matter how the calculations were adjusted, households in the informal settlements simply do not earn enough to pay for electricity.

It was found that the monthly income of households in the informal settlements range between N$891 and N$1 100.

For most, this is not enough to cover their basic living expenses, and most are still left owing at the end of the month.

Capital development costs to provide households with electricity is estimated at around N$5 500 per household, which includes the cost of the distribution network, planning and household connections.

The City has calculated the total cost of electrifying existing informal areas as just more than N$1 billion over the next 30 years.

Households would have to pay monthly instalments of N$130 to recover the capital costs over a five-year period at an interest rate of 15 per cent.

According to the City’s estimated calculations of what it would cost to provide electricity and that which it would receive from electricity sales, it says it would be providing electricity at a loss of N$122 per household per month.

Depending on the repayment period of the capital cost, it could stand to lose between N$50 million and N$250 million in the provision of electricity for these households.

At its meeting on Wednesday, the City Council resolved that the Khomas Regional Council and the Ministers of Local Government and Mines and Energy be approached to lobby Cabinet for a Government-supported programme of urban electrification, similar to its rural electrification programme.

It further decided that once the Central Regional Electricity Distribution Company is established, it should approach Government for a subsidy to at least cover the distribution and planning costs of the electrification programme.

Central RED will also be advised by the City to consider the provision of loans to qualifying households to cover connection fees.