Eskom hike 'unacceptable'

Johannesburg - Trade union Cosatu has said the 31.3% electricity tariff hike granted to power utility Eskom is "totally unacceptable" and unwarranted as it is almost four times the inflation rate.

"Cosatu strongly condemns this hike; it is a face-saving measure by Nersa (the National Energy Regulator of SA) to show it is independent," Cosatu spokesperson Patrick Craven told Fin24.com after the announcement on Thursday. "It's going to affect the poor the most."

Craven said the union will use Nedlac structures to argue for a special tax "on the rich" to pay for Eskom's infrastructure investment. "The tariff hike will have a negative impact on inflation and will no doubt make the recession worse, as small businesses cannot afford it," said Craven.

Brait economist Colin Garrow agreed that with the power price hike inflation is "not going to come down fast".

He said: "The electricity tariff hike goes straight to the inflation basket. Electricity is one of those administered prices that will weigh against the inflation outlook.

"Beyond today [Thursday's interest rate announcement], the appetite to cut interest rates will be weaker."

The rate hike will take away consumers' buying power and delay a recovery in expenditure, said Monale Ratsoma, economist at Thebe Securities.

"You are dealing with households that are already under pressure, and then you add another burden on already tight budgets. That is where the pain is." Ratsoma said the hike will contribute to a delay in economic recovery as job losses are still expected to rise.

Eskom had applied for 34% hike to fund a R385bn capital expenditure for electricity generation.

- Fin24.com