Business body strengthens opposition to Eskom tariff hike

Johannesburg - Power prices in South Africa have risen 70% since 2010 and a second double-digit increase proposed for this year will make it difficult for the country's businesses to compete internationally, an industry body said on Wednesday.

The country is in the midst of its worst electricity crisis and Eskom, which supplies 95% of South Africa's power, raised tariffs by 12.69% in April and has applied for a further 12.7% price increase to come into effect from July 1.

"These significant increases, as well as the inability of Eskom to provide reliable electricity, place significant pressure on the South African economy and makes South African industry uncompetitive against international competitors," the Energy Intensive User Group (EIUG) said in a submission to be made to South Africa's energy regulator.

Persistent power shortages have slowed economic growth in the country, with the domestic purchasing managers' index and business sentiment weakening. Finance Minister Nhlanhla Nene has said South Africa's 2%t growth forecast could shrink if the the worst electricity crisis in seven years continues.  

The EIUG, which represents major companies in South Africa, including mining houses such as AngloGold Ashanti [JSE:ANG] and BHP Billiton [JSE:BIL], is opposing the price rises and will make its submission to the National Energy Regulator of South Africa (Nersa) for public hearings next week on Eskom's application to raise tariffs.

Nersa will invite the public to make submissions next Tuesday and Wednesday before deciding whether to approve Eskom's application or demand a less severe increase.

The EUIG said prices have leapt by 70% based on tariff hikes between the 2010/2011 and 2014/2015 financial periods.

At a media briefing on Wednesday, Eskom's acting CEO Brian Molefe defended the proposed tariff increases, saying that the alternative would be more power cuts that would be detrimental to the economy.

READ: High power prices or power cuts, says Brian Molefe

Last week a World Bank report on doing business in South Africa cited electricity supply as one of the main challenges experienced by companies in the country.