Blue Label Telecoms, the listed prepaid specialist, is on a campaign to win more business with municipalities by investing its own money to locate lost electricity tokens on behalf of local authorities.
Lost tokens, meter tampering and ghost vendors (who illegally sell electricity vouchers) have been issues for Eskom and municipalities for years.
Through its subsidiary, Cigicell, the company has traditionally made revenue by selling prepaid electricity tokens on behalf of about 95 municipalities and Eskom since 2004. But Mark Levy, joint CEO of Blue Label, told Business Day their aim is to do more than simply supplying electricity tokens, a business with low margins.
Blue Label competes with banks and other companies such as Net1’s EasyPay in the electricity tokens business.
During the reporting period, revenue generated on behalf of utilities for electricity increased 16% from R11.4bn to R13.2bn. Net commissions earned on the distribution of prepaid electricity amounted to R154m, an indication of the low margins in the business.
As a way to increase its margins and grow its municipal client base, Blue Label has elected to foot the bill in a meter auditing exercise. For each token and revenue recovered, the plan is to reduce headaches for municipalities and increase their revenue while more funds flow into Blue Label’s coffers.
Without giving too much away, Levy estimates mismanagement and misappropriation of electricity tokens has resulted in “billions” in lost revenue.
“What we’ve realised is that you can’t fix a single fault in the industry or municipalities, thinking it’s going to resolve their problems. A municipality is literally an ecosystem and unless you start fixing all the moving parts in the ecosystem, it doesn’t really help to plug a hole right at the end of the food chain,” Levy said in an interview after the company reported its earnings for the six months to November 2020.
He said Blue Label focuses on programmes it terms “revenue assurance and revenue protection”, in municipalities with which it has contracts.
“We’re a net employer in those districts and by a footsoldier method. We walk building to building, shop to shop, office to office and ensure that those have a correct and functional meter — it’s not breached — and it says what type of company it is and that the tariffs are right for that industry.”
With so much of the electricity procured from Eskom being lost or stolen in the system, Levy said their job is to help authorities “find all of these leakages”.
“The secret is helping them find all this misappropriated electricity, and we believe it’s a better margin game for us because it’s a risk game. They don’t pay us anything unless we find something.” And if Blue Label finds something, they are rewarded for it.
With municipal contracts coming under review — either they are renewed or new partners found — Blue Label is hoping that helping municipalities to streamline their operations to become more efficient, and assisting with overall billing and collections, will grow their business, improve margins and win more contracts for the Johannesburg-based company.
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