Cape Town - The 8% tariff increase over five years the National Energy
Regulator of SA (Nersa) granted Eskom on Thursday is good news for
inflation, according to an economist.
In a commentary, Nomura emerging markets economist Peter Attard Montalto said: "This is bad news for Eskom's balance sheet...
"The government is asking Eskom to
accelerate its infrastructure programme and take the bulk of that
programme on its shoulders, whilst not allowing it to raise funds
through user-pay-principle to fund it.
"This is good news for
inflation though, and will shave some 0.16pp off our forecast from July
this year which means inflation may well only be around 5.0% at year end
- hence no need to hike rates this year at all, nor well into the
middle of next year."
Eskom had asked for a 16% increase in electricity prices in
each of the next five years, which would more than double the price, taking it
from 61 cents a kilowatt hour in 2012/13, to 128c a kWh in 2017/18.
"The decision of the energy regulator is based on facts," Nersa chairperson Cecilia Khuzwayo said.
She added it was important to note that Eskom's application for a 16% hike was
made with the backdrop of "continuing global economic recession".The parastatal previously said it needs the increase to
cover the costs of supplying the electricity needed to power South Africa and
invest in infrastructure.
The proposed increase was met with criticism from political
parties, unions, civil society, businesses, and South Africans in general.
The Federation of Unions of
SA said it was pleased with the lower tariff rate.
"We welcome the 8% increase.... Although the increase will still be felt by working
people, we feel that this is much better than the 16% requested by
Eskom," Fedusa general secretary Dennis George told Sapa.
He said the decreased rate
will impact on inflation.
George said the 8% was exactly half of Eskom's bid and this meant electricity, which cost
65c per kilowatt hour in 2013, would cost 89c per kilowatt hour by 2018.
Business Unity SA (Busa) praised Nersa to limit the electricity price rise.
"The excessively steep rises in electricity tariffs in recent years have been damaging to growth and employment," Busa special policy adviser Raymond Parsons said in a statement.
"[The increases have] raised the costs of doing business, and have put many business enterprises at risk."
The debate around the price-determining mechanism highlighted the uncertainty within Eskom's decision-making model, said Henk Langehoven, senior economist for the Steel and Engineering Industries Federation of SA (Seifsa).
"It fortunately also brought to the fore the results of business putting its collective mind to the problem and highlighted alternatives to asset evaluation methods," he said.
"This result shows that these inputs carried weight and influenced Nersa's decision," said Langehoven.
The Congress of SA Trade Unions welcomed the lower electricity
hike, but was still cautious.
"It still amounts to a rise in the cost of living and could still jeopardise jobs in struggling companies," spokesperson Patrick Craven said.
will also have to check what percentages municipalities are going to
add on to the 8%, which is likely to mean many thousands of consumers
paying well above that amount."
Craven said that Nersa's decision
to halve the asked-for increase was most likely due to campaigns
conducted by the union federation and other organisations.