Real Estate Investor Magazine South Africa May 2014 | Page 39

for their services. Most of the business models are similar, which entails the
body corporate purchasing prepaid meters for each unit, which is then linked
to the vendor’s vending platform (the vendor software application): some
have their own and some use other larger platforms.
The larger the vendor, the larger the choice of outlets for the owners to buy
from, so the first thing to check is how big the vendor is that scheme will be
obliged to buy through and which outlets they can buy their tokens from.
There are larger vendors who have their own systems, which the body
corporate will be limited to buying their electricity through. The prepaid
cards they supply will have a number linked to their system, which then
dictates where the owners of the units will have to buy their units from. The
problem here is if there are limited hours when purchases can be made or no
online purchase option is available. Sometimes, too, the vendor doesn’t have
a card machine and so owners have to pay cash each time.
In addition, there is a monthly charge for the monitoring of these meters:
usually around R29 per month and sometimes as high as 10% gets added to
the monthly cost.
Alarmingly, sometimes the vendor allows the arrears that the body
corporate owes to be added onto the monthly payments, which then means
that each owner, if they had to recharge their meters, will only get a portion
of what they paid for because they are paying off a debt.
The problem comes in where the tariffs of electricity are calculated – each
vendor varies. The tariffs are often higher than what the consumer would
pay if buying directly from Eskom or the municipality. The costs broken
down could possibly be: the vendor takes up to 10%, a store that it is bought
through could charge up to 3%, so before you even have received any units,
up to 13% is being taken off the top to pay for the service.
Many vending contracts last for five years or longer, so this is why it
is so important for the body corporate to investigate fully all the charges
and running costs, before agreeing to sign a contract with any vendor. The
contracts can be quite complex, so careful thought needs to be put into
whether, (a) this is actually necessary for the scheme, and (b) what the
owners will actually be paying for and what they will be receiving.
Some sectional title schemes don’t actually need to convert to prepaid
systems because they do not have any problems in collecting the amounts
necessary and have stable consumption over the years. What the trustees
do need to consider carefully is the owners’ costs to operate and maintain
whichever system they choose.

RESOURCES
IHPC
www.reimag.co.za

REALE ESTATE BUSINESS DIRECTORY