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Power price hike to hit hard

Mar 02 2016 12:16
Edward West, The Witness
eskom

(Picture: Chris Kirchhoff/MCSA)

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Pietermaritzburg - Only receiving a 9,4% electricity tariff hike could impact on Eskom’s ability to keep the lights on.

This was the warning from the power utility yesterday after the National Energy Regulator of South Africa (Nersa) pronounced its ­decision on Eskom’s bid for a 16% increase.

But the above-inflation increase would also hurt people and businesses already struggling against a barrage of fast-rising cost increases this year, which have been caused by drought and rand depreciation.

Eskom CEO Brian Molefe said yesterday: “Nersa’s decision … again doesn’t address the question of Eskom’s financial sustainability. In addition, it will have operational consequences.

“We will do our best to minimise the risk of load shedding, striking a balance with ­Eskom’s already depleted balance sheet,” ­Molefe said. “We have reduced diesel usage in recent months and have made great strides in our maintenance plan. However, we continue to run a constrained grid. The recovery of diesel costs is now seriously in question with Nersa’s current decision.”

Nersa granted Eskom a 9,4% tariff increase from July, but Eskom had applied for an increase of 16%.

Nersa’s decision followed a public ­participation process, where 10s of 1 000s of people and organisations indicated that ­Eskom should not increase tariffs at all.

This was after Nersa granted Eskom an ­average annual 22% increase for the seven years to the end of 2015, after the initial electricity blackouts in 2008.

Mervyn Abrahams, director of the Pietermaritzburg Agency for Community Social Action (Pacsa), said households were already in dire straits and further social unrest was possible this year as the affordability crisis deepened.

Apart from the electricity increase, salaries were not likely to increase above inflation, food prices had risen above 13% in the four months to end-February, and interest rates had just been increased. For a household living in ­Pietermaritzburg, with an average income of R3 200 a month, electricity charges consume 15,9% of total income.

“We have got to break out of the cycle where Eskom requires above-inflation tariff increases. It must change its business model,” said ­Abrahams.

Pietermaritzburg businesspeople were also despondent about the increase.

Pietermaritzburg Chamber of Business CEO Melanie Veness said: “We would have preferred no increase” because business conditions were so tight, that every cost increase imposed by the government could mean job losses at some businesses.

Dick Whittington Shoes managing director Arveen Boodhoo said their business would be hurt by the electricity price increase. This would come after they had already dealt with the effect of the rand’s devaluation on the business in ­January.

“The increase is well above inflation; how can they justify it?” asked Boodhoo.

A director of a large retail firm in the city, who chose to remain unnamed, said the ­increase put them in a difficult position because retailers were finding it difficult to pass on the costs to consumers because of the weak ­economy.

Household debt already consumes 77,8% of income nationally, which means that for every R100 income, R77,80 goes to repay debt and only R22,20 is left to pay for goods and services (transport, electricity, education, food, etc.).

Steel and Engineering Industries Federation of Southern Africa economist Henk ­Langenhoven said the increase would ­contribute to more job losses and postpone a recovery in metals, auto and engineering ­companies. Production in these sectors was still 30% below the level in 2007, he said.

• edward.west@witness.co.za

pietermaritzburg  |  power  |  electricity
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