Business

Electricity price hikes slammed

Staff Reporter

The Congress of South African Trade Unions called the hikes -- more than four times the current rate of inflation -- "totally unacceptable".

The National Electricity Regulator of South Africa’s (Nersa) decision on Eskom’s multi-year tariff increase application on Wednesday elicited threats of strikes and dire warnings of job losses.

Nersa announced it was granting the power utility a 24,8% tariff increase for 2010, 25,8 % for 2011, and 25,9 % for 2012.

The Congress of SA Trade Unions (Cosatu) called the hikes—more than four times the current rate of inflation—“totally unacceptable”.

Spokesperson Patrick Craven said Cosatu would “not shrink” from mobilising its members and the South African public to embark on strike action and protests over the price hikes.

“The rises will still have all the severe negative impacts that Eskom’s proposed outrageous 35 % a year tariff increase would have had.”

Craven predicted that the economy would be hit by a rise in inflation, jeopardising its chances of recovering from its first recession in 17 years.

“Many businesses which are already struggling to survive will not be able to afford such a massive increase in one of their biggest running costs.

“Jobs could be lost, fewer new jobs will be created and many firms may even be forced to close down,” he said.

‘Dissapointed’
The Federation of Unions of SA (Fedusa) was “utterly outraged and disappointed” over the hike.

“Fedusa will be making every effort to call for a review on the approved increases and has previously suggested that a new funding model for Eskom be reviewed so as to not expect the workers and the poor to pay for the mistakes of Eskom’s bad management of the past,” general secretary Dennis George said.

The National Union of Metalworkers of SA called on the ANC and its alliance partners to reject the price increases.

“These tariffs are going to exacerbate job losses and negate government’s efforts of creating decent work in the midst of high cost of living and widening income inequalities among the rich and the poor,” spokesperson Castro Ngobese said.

Vast improvement
However, the ANC congratulated Nersa for “applying its mind on” Eskom’s increase proposal.

Their decision was a vast improvement on the original proposal by Eskom for tariff increases of 35 % over a three-year period.

“Although we congratulate Nersa, we should at the same time state that the electricity tariff increases remain high and require other interventions to reduce the endemic poverty in our country,” spokesperson Jackson Mthembu said.

The South African Communist Party views the increases as “a catastrophic betrayal” of the poor.

“It is indeed very sad that the majority of our people are expected to pay for the blunders of the elite,” said spokesperson Malesela Maleka.

Job losses
The SA Chamber of Commerce and Industry (Sacci) also warned of vast job losses.

“Energy constitutes a major input cost for a large proportion of businesses. The increase will probably have an adverse impact on investment in production,” Sacci said in a statement.

“Sacci estimates that approximately 250 000 jobs will be lost as a consequence, and it will be a factor in CPI [consumer price index] remaining outside the target range.”

But Business Unity SA said it was buoyed that only a 24,8 % had been approved.

“Twenty five percent is what the [South African] Reserve Bank has been saying would be absorbed by the economy,” said chairman Raymond Parsons.

Nedbank economist Carmen Altenkirch said the increases would hit small to medium enterprises hard.

“These are the enterprises that are responsible for a lot of job creation and they were hit hardest by the recession,” she said.

Unfair on consumers
Opposition parties said the hikes would result in consumers paying for the failures of the ANC, and would raise funds for the ruling party through its part-ownership of Hitachi Power Africa.

“The announcement of yet another hike demonstrates that the ANC administration has once again fallen prey to precisely the same misguided logic that has dominated the ANC’s approach to parastatals over the last decade,” DA spokesperson Manie van Dyk said.

The Independent Democrats (ID) warned the hikes “will cripple our economy, consumers and small businesses and has committed us to a coal-fired energy future South Africa and the world can ill-afford”.

ID energy spokesperson Lance Greyling said it meant ordinary South Africans would be forking out money for electricity which would go to the ANC’s investment company Chancellor House.

According to media reports, the ANC is set to earn billions of rands through tenders given by Eskom to Hitachi. Chancellor House owns 25% of Hitachi.

United Democratic Movement leader Bantu Holomisa also warned the increases were likely to lead to higher unemployment, and also linked the higher tariffs to the ANC’s business interests in Hitachi’s contracts with Eskom.

But, Energy Minister Dipuo Peters said she “respects” the “necessary” immediate increase of 24,8%.

“It has become necessary to conclude the price path for the electricity industry to eliminate the uncertainty around the funding of the capital programme for the sector,” Peters said.

Eskom itself, said it had “noted” Nersa’s announcement.

“Eskom is currently studying the full details of the determination and is in consultation with key stakeholders.

“We will make further comment on the determination and its specific implications,” Eskom acting chairman Mpho Makwana said.—Sapa

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