Understanding Erongo RED’s Role in Swakopmund’s Development and Sustainability
Swakopmund is actively working toward a vision of economic diversity and sustainable development, where growth in tourism, industry, education, and healthcare sectors is balanced with robust municipal services and infrastructure. A key player in supporting these goals is ErongoRED, the regional electricity distributor, whose financial structure and energy strategy have become instrumental in shaping the town’s future. Here’s a closer look at how ErongoRED’s role has evolved to support Swakopmund and the surrounding region.
Erongo RED: Powering Swakopmund’s Growth
Erongo RED was established in 2004 as a collaborative initiative to centralize electricity distribution for the Erongo region, optimizing operational efficiencies and aligning with the unique needs of each municipality. Swakopmund holds a 28.49% share in Erongo RED, while Walvis Bay, with 49.87%, is the largest shareholder. Smaller shares are held by other towns and stakeholders across the region. Erongo RED’s board includes ten directors, with both Swakopmund and Walvis Bay nominating two members each, giving these municipalities substantial influence on the board and the company’s operational decisions. (Municipalities transferred all their electrical infrastructure towards Erongo RED including street lighting and traffic lights)
Financial and Operational Model
Historically, Swakopmund’s municipality generated revenue by selling electricity, which helped offset the costs of essential services that don’t generate direct income (non-profitable?), like road grading and street lighting. However, since transferring electricity sales to Erongo RED, the municipality now relies on a small surcharge on each kilowatt-hour sold. This surcharge, estimated at $0.07 per kilowatt-hour, generated between six and seven million dollars last year, proving crucial to funding municipal services.
Dividends and Tax Challenges
Erongo RED’s profits are used not only to pay dividends to stakeholders but also to fund regional infrastructure upgrades, which are critical as the area grows. In recent years, Erongo RED resumed issuing dividends after (Last financial year first time dividends were declared after years without) a temporary pause to focus on these upgrades. In addition to the dividend payments, the government benefits financially from Erongo RED’s VAT on electricity sales and collects a 35% income tax on profits, creating a steady revenue stream for national and local needs.
Swakopmund’s council has explored options to restructure Erongo RED as a Section 21 (nonprofit) company to alleviate ( No tax burden, but the REDss main task is to upgrade the whole Erongo region, which is hampered financially by the tax paid to Central Government. In fact, the Redss took over the responsibility from Government) the tax burden on the municipality. However, the requirement to collect a surcharge complicates this shift, meaning the (no financial gains from a Section 21 Co are allowed) current financial model must stay in place for now. Nevertheless, the local government continues to pursue viable ways to reduce operating costs while supporting the town’s growth.
Tackling High Electricity Tariffs
High electricity tariffs have become a growing challenge for Erongo RED, impacting both residents and businesses. This challenge has led many consumers to install rooftop solar panels to reduce their dependence on the regional grid, mirroring a trend in South Africa where municipalities face unpaid debts as users generate their own power. For Swakopmund, this situation underscores the importance of diversifying energy sources to stabilize costs and retain customers.
Embracing Renewable Energy and Sustainability
In line with Namibia’s broader sustainability goals, Erongo RED (Actually Government not the REDs) is exploring renewable energy projects to diversify its energy supply.(to mitigate the dependency of electricity supply from neighboring countries) A significant project in the pipeline By Messrs HdF Energy involves installing a 160-megawatt solar panel facility in Swakopmund, capable of producing hydrogen through electrolysis and thus storing electricity for later continuous use.. This facility could feed surplus energy directly into our grid, enhancing regional energy security and contributing to a more sustainable future.
ErongoRED’s Role in Swakopmund’s Vision
The conversation around Erongo RED goes beyond electricity; it reflects Swakopmund’s broader commitment to economic sustainability and resilience. Through strategic financial management, tax exploration, and renewable energy projects, Erongo RED is helping Swakopmund realize its vision of a self-sustaining, economically diverse community.
As Swakopmund continues to grow, Erongo RED’s evolving role will be essential to meeting the town’s needs and enhancing residents’ quality of life. By strategically balancing traditional revenue sources with innovative energy solutions, Swakopmund is poised to create a sustainable environment that supports both economic growth and environmental stewardship. It must be said, that Erongo RED is the best functioning RED in Namibia by far!
