Cape Town - Eskom’s tariff demands will more than double the cost of electricity – and this at a time when South Africans already find electricity less affordable than consumers in many other countries. The cost of electricity to the industry will also impede investment into South Africa.
This is the stark warning of new research just released by leading economist Mike Schüssler, CEO of economists.co.za.
“Eskom has applied for an annual 16% rise over the next five years, which would mean a cumulative increase of 110% – that’s more than double,” says Schussler.
Compiling data on 15 different professions, including teachers, factory workers and bank clerks, he compared the affordability of electricity in 33 countries.
The research found that workers in 18 of the 33 countries find electricity more affordable. These countries include the USA, Switzerland, Japan, France and the UK. In only 14 of these countries workers found electricity less affordable than in South Africa. From this high base it would be difficult for South Africa to compete in the cost structure of the economy.
“One could rightfully understand Eskom’s tariff request if prices were still at their previous low levels, but, due to the massive increases in recent years, we are already facing high tariffs, particularly for households,” says Ben Venter of Sasbo, which co-sponsored the research along with the Energy Intensive User Group.
Mike Rossouw from the Energy Intensive User group noted that from 2002 the South African industrial energy prices have shot up by more than 250% in real terms, which, according to this research, “is the highest increase found anywhere in the world.”
Schüssler also revealed that whilst much of the attention of these electricity price hikes is focused on Eskom, many users will also face high mark-ups when their electricity is provided through municipalities. National Treasury data reveals that municipalities have an obscene mark-up of 75% on average for water and electricity.
The research shows that over the last seven years South Africa has had the highest increase in electricity prices in the world – double that of the second highest country. The proposed 110% increase over the next five years would have also been the highest over the last five years. “Local governments are effectively using electricity to balance their books,” says Venter.
The research also highlights the way in which South African consumers and most industrial customers are heavily dependent on electricity, and have little alternative but to use electricity as their only energy resource.
“The research further revealed that in many parts of Europe, gas is available as an energy resource for most households or businesses,” according to Venter.
“Gas is much cheaper than electricity and is widely used for cooking and heating in homes and, particularly, in industries,” says Rossouw.
“The report showed that South Africans derive 90% of their energy from coal, who are mostly customers of Eskom, and there is no realistic alternative.”
The report’s conclusions are:
- The National Energy Regulator (NERSA) must not only focus on Eskom, but must also cap tariff hikes prepared by municipalities.
- Tariff increases must return to inflation-related increases as soon as possible.
- NERSA must only allow efficient cost for Eskom and eliminate extraordinary expenses such as in primary energy and wages.
- Our international ranking in terms of electricity tariffs cannot be ignored, and NERSA must study the OECD data to understand that South Africa no longer has lost its competitive edge in energy prices.
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Source: Meter-it and economists.co.za
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For more information, call Ben Venter, Deputy General Secretary, Sasbo – The Finance Union – on 011 467 0192 or 083 407 8335