Cape Town has scrapped a longstanding practice of using a portion of electricity sales to subsidise other municipal services, introducing a ring-fenced tariff for cleaning and waste removal instead. The reform comes into effect in the 2025/26 municipal year and aligns with National Treasury’s Trading Services Reform Programme.
Previously, 10% of every electricity unit sold funded city-wide services such as street cleaning. Under the new model, this cross-subsidy has been removed and a separate, dedicated tariff will be introduced to fund those services directly.
According to the city, the structural change will ease pressure on electricity costs, particularly for high-consumption households. “This reform is aligned with the broader National Treasury-led Trading Services Reform Programme, which has a key objective, within the waste management space, to ensure services are sustainably funded via ring-fenced tariffs, as with other utility services,” the city said in a statement.
The change contributes to Cape Town’s lower-than-average electricity tariff increase of 2% for 2025/26 compared to Eskom’s 11,32% increase for municipalities. Households using 750 kWh or more per month could see a decrease in their total municipal bill of up to 3%, depending on property value and water use. Most other users will experience increases capped at around 3,5%.
The new structure may also improve Cape Town’s eligibility for a performance incentive grant under National Treasury’s reforms. “Cape Town’s progress in this regard puts the metro in line for Treasury’s new performance incentive grant and a share of the performance-based R54 billion available over six years,” the statement said.
The city has also proposed changes to how water and sanitation fixed charges are applied, linking them to property value bands rather than meter connection sizes. This is expected to provide additional relief for properties valued under R2 million.
The reform forms part of a broader R39,7 billion infrastructure investment plan over the next three years to benefit lower-income households.
