The King Sabata Dalindyebo municipality (KSD) has lost an estimated R132m in revenue since early 2025 due to a suspected “ghost vendor” electricity scam, compounding a financial crisis caused by vandalism and infrastructure damage.
The alleged scheme involves unauthorised vendors selling prepaid electricity coupons under the guise of acting on behalf of the municipality and then pocketing the funds.
The losses incurred as a result of the scam add to the nearly R35m the municipality has spent since January on repairing vandalised electricity infrastructure in Mthatha.
In a public notice issued last week, municipal manager Ngamela Pakade warned residents about the fraudulent activity.
“There are various ghost vendors that sell prepaid electricity under the pretence that they are selling for the municipality [but they] are not authorised by the municipality to do so,” Pakade said.
He urged customers to purchase electricity coupons only from approved outlets, warning that purchases made elsewhere would not be refunded.
Electricity sales are one of the municipality’s most important revenue streams, but sources say income has declined sharply.
This ghost vending business has now become big business
An insider said KSD previously generated about R300m annually from electricity sales, but this had dropped to about R168m.
Monthly revenue from prepaid electricity sales has reportedly fallen from about R25m in February 2025 to between R15m and R16m now.
“This ghost vending business has now become big business,” the source said.
Municipalities are expected to limit electricity losses to about 10% annually, but KSD’s losses have reportedly exceeded 20%, raising concerns about compliance with Eskom regulations.
The municipality is also grappling with the spiralling cost of replacing stolen and vandalised electricity infrastructure, including the torching of mini-substations and kiosks, which officials describe as deliberate sabotage.
KSD’s technical services director, Unathi Mnqokoyi, told an emergency meeting convened over the Easter weekend by mayor Nyaniso Nelani that more than R34m had been spent on repairs since January.
Nelani said initial reports of technical faults were found to have been the result of vandalism.
“Our technical teams discovered that critical infrastructure had been deliberately tampered with,” he said.
The municipality has also been embroiled in a protracted legal dispute over its electricity vending system.
Contour Technologies previously held the contract for electricity vending services until 2022, when a new three-year tender was awarded to Conlog.
Contour later secured a court interdict preventing Conlog from implementing its system, leaving the matter unresolved.
Eastern Cape Chamber of Business secretary-general Dr Andile Nontso said the emergence of ghost vendors pointed to deeper systemic failures.
“We ask ourselves: how did that happen? How did they get the information on how to sell? Is there no inside job, and when did it start?
“This could be the reason [the cost of] electricity is skyrocketing in Mthatha and why many SMMEs are struggling to do business [in] KSD because of exorbitant electricity [costs] and these leaks in the selling of electricity.”
He said the municipality needed to urgently resolve the issue.
Former municipal public accounts committee chair turned activist Pasika Nontshiza dismissed the explanation of ghost vendors as misleading.
“Electricity vending is an automated process which, if not authorised, will be rejected by the system.
“So, this is a decoy for KSD failures,” he said.
“This is an act of financial misconduct requiring council, if it had teeth, to charge the municipal manager.”
UDM councillor Raymond Knock said he had long raised concerns about the issue, questioning how unauthorised vendors were able to access the system.
“They have been calling it distribution losses running into millions of rand per quarter,” he said.
“I have even asked for an investigation from a private company to check where these ghost vendors come from because, as far as we know, there is a single code that comes from Eskom and is given to the municipal manager.”
Knock said electricity losses had escalated sharply.
“In the past, losses were around R10m a year, but in the last quarter — December — we had distribution losses close to R100m, which is impossible to understand,” he said.
A municipal source with knowledge of the process said vendors could only sell prepaid electricity after being formally authorised to do so.
Once approved, vendors were issued a code to allow them to access the municipality’s electricity vending system and purchase units for resale.
“The system is controlled,” the source said.
“Only someone with that group supply code can access units and sell them.”
The source said the vendor’s system was linked to the municipality’s, enabling purchased tokens to be generated and entered into prepaid meters.
The authorisation forms are signed by senior municipal officials and submitted to Eskom, which supplies electricity to the municipality.
“The question is then how do these so-called ghost vendors get access?” the source said.
Questions sent to the municipality three weeks ago had not been answered by the time of publication despite numerous follow-up calls and messages.
Daily Dispatch
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