Eskom hike will cripple mines

Eskom hike will cripple mines

2013-02-01 07:57

Cape Town - Eskom's 16% tariff increase will push the mining industry over the tipping point, the Chamber of Mines said.

The body told the the National Energy Regulator of SA (Nersa) on Thursday that Eskom was more interested in its credit rating than the interests of South Africa, reported Business Day.

It warned that the electricity increase will force mines to lay off staff.

More than half of the country's platinum mines are loss-making or marginal and 37% of gold mines are in a similar position, however, electricity added R7bn to their costs over the past five years.

Roger Baxter, senior executive at the chamber, told the hearing that Eskom was too focused on profit making and claimed that it was evident in the fact that two thirds of the proposed increase in electricity prices was attributable to return on capital and depreciation charges.

"This clearly shows Eskom is primarily focused on achieving a standalone investment grade rating at the expense of the competitiveness of South Africa’s electricity intensive tradable sectors," he said.

Chamber of Mines president Mark Cutifani said it appeared that the 16% increase was needed in order for Eskom to secure its investment-grade status.

"The economic impact of Eskom’s proposals is substantially negative. The South African economy cannot absorb the proposed further doubling of the price on the back of a price that has already trebled," Baxter said.

The current Multi-Year Price Determination, MYPD2, ends on March 31 2013. New tariffs will be implemented from April 2013.

Nersa will announce its final decision in February, following an extended period of consultation and public hearings.

In January, Fitch credit ratings lowered its outlook on Eskom's long-term local currency IDR to 'BBB+' from 'A' with a stable outlook. It also dropped its senior unsecured local currency to 'BBB+' from 'A'.

  • arthur.salvado - 2013-02-01 08:20

    If its not Eskom crippling the mines, it will be something or someone else. It's doomed to destruction. It's Africa's way and there no going back. Check out history.

  • tamlin.vanheerver - 2013-02-01 08:39

    What a load of rubbish... "more than half the platinum mines don't make a profit.." yeah right, it doesnt take a rocket science to run a business but it does take an idiot to lie. Secondly do you honestly think that the mining sector pays R0.80c + per kilowatt hour? Ohh please, they pay around R0.13c or something ridiculous, its the consumers that pick up the brunt! 16% of a drivel is still a drivel

  • tumelo.motloung.779 - 2013-02-01 08:40

    we can make all the noise but Eishkom will get their increase. those fat cats at Eishkom need their bonuses from the "profit" their company will be making on the proposed increases. if anyone can remove Eskom, SABC and SAA under government they can close shop in no time.they're just loss making companies.

  • zander.vanderwalt - 2013-02-01 12:01

    Mining company leaders in SA are usually tipped as highly capable etc. - the way they deal with restrictive labour policy, govt policies that don't enable growth and so on and so on... Surely this illustrates that their strategies ito of energy is a massive failure. In other countries (Africa / Australia / South America) a mine is responsible for its own energy generation. You can't be all that astute if you only rely on Eskom - just start generating your own energy and do it soon because next year at the same time you're gonna hear the same arguments again with the next round of 16% increase - no matter how you look at it Eskom needs those increases to pay for the ridiculous contracts they signed for Medupi and Kusile and to fund the further capital necessary for their planned nuclear roll out.

  • willie.dutoit1 - 2013-02-01 12:10

    What i do not understand is WHY eskom needs to advertise or have a whole advertising dept? It is not like we have a choice to use someone else to supply power , and I'd love to know what the ads dept salaries , premises and prime time ads cost eskom

  • Msizi Kubheka - 2013-02-02 01:40

    on Wednesday SA citizens will be hit by a 41c/l increase in petrol, then on April Eskom will boom us with a 16% increase in power. This is BAD! Can't we have a FIXED rate of fuel prices in SA? or can someone start a company that will generate power so that Eskom will have competition, maybe something will change! Since they're price setters, they'll keep doing this until the rich get poor and the poorer DIES!

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