Eskom hikes to hurt builders

Pretoria - Eskom's planned 45% electricity tariff hike could cost the local building and construction industry more than 100 000 jobs next year.

This is according to University of Pretoria economist Reyno Seymore, who reckons South Africa will lose its competitive advantage over other countries if its electricity tariffs rise so drastically.

Foreigners would prefer to invest their money where electricity is less expensive.

This was illustrated by the recent decision by Rio Tinto Alcan to scrap its plans for building an R18.9bn aluminium smelter at Coega in the Eastern Cape because of South Africa's power problems.

Seymore reckons that foreign investment will decline by 10% next year if the tariff increase goes ahead.

This, he says, will be a particularly heavy blow for the building and construction industry because new plant and expansions are erected by the industry's contractors.

The industry is extremely labour-intensive and makes particular use of semi- and unskilled labour.

Seymore expects an 8% contraction in the building and construction industry in 2010 if Eskom gets the green light. This means that 100 000 to 110 000 industry jobs will be lost.

Pierre Blaauw, construction economist and operations manager for the Federation of Civil Engineering Contractors (Safcec), says it is difficult to estimate the net effect of the proposed tariff hikes on civil construction.

On the one hand, the industry is well placed to benefit from the building of new power stations by Eskom and independent power producers.

On the other hand, projects such as Rio Tinto's would be forfeited, meaning less construction work for the industry. Blaauw however expects that mining groups will increasingly generate their own power and that contractors will build their generation plant, creating additional jobs.

- Sake24.com

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