The African National Congress (ANC) and its labour allies called on Friday for electricity prices to rise only gradually, rejecting Eskom’s appeal for a sharp hike to solve a dire power crisis.
Eskom, which produces about 95% the country’s electricity, is rationing power in response to a supply shortage that has led to regular and widespread blackouts and sent a chill through industry and investors.
Power failures in January forced large gold and platinum mines to shut down for five days, pushing world precious metal prices higher. The mines are now operating at 90% to 95% of their normal electricity supply.
As part of its bid to tackle the crisis and fund a R350-billion infrastructure expansion, Eskom has requested a revised 53% increase in electricity tariffs for 2008 and 2009. It had previously received a 14,2% hike.
The ANC and its leftist allies, however, argue the poor and workers will be unable to afford electricity if regulators approve the request. There are also fears it would fuel rising inflation, currently more than 10%.
”We are convinced that the economy cannot afford that sharp increase in electricity prices,” ANC secretary general Gwede Mantashe said at an energy summit in Johannesburg that drew top officials from the ANC, government, business and labour.
He said it would be wrong for Eskom to use price rises to recover from past losses.
The government said that it preferred a 35% to 40% tariff increase for 2008 and 2009 and believed that the National Energy Regulator of South Africa (Nersa) should make municipalities also adopt the proposed differentiated tariffs for the poor. This was to reach a price level of 46 cents per kWh by 2012.
Minerals and Energy Affairs Minister Buyelwa Sonjica said electricity price increases must be treated with sensitivity.
”It is a fact that electricity cannot be treated as another commodity; it is a key input into our economy and is a basic need for most households. Any price increase therefore is to be treated with sensitivity and subjected to consultation with all the affected stakeholders.”
Congress of South African Trade Unions general secretary Zwelinzima Vavi said it pained him to say that the union federation accepted that an increase was necessary. ”But we can’t simply write a blank cheque for Eskom because they are telling us their costs are rising.”
He said a better understanding of the issues behind Eskom’s application for a 53% increase was needed.
Speaking on the sidelines of the conference, Winnie Madikizela-Mandela expressed concern over the effects of load-shedding and rising prices on the poor. ”Nobody has thought of the poorest of the poor. Women are the worst victims.”
She said those who run small shops have lost everything. ”They depend entirely on electricity to make ends meet.”
Compromise
Mantashe later told reporters he expected a compromise to phase in price increases over a period of up to five years.
Eskom has blamed its problems on a combination of factors, including the failure of the government to invest in electricity generating plants, maintenance problems at its existing facilities and wet weather that affected coal supplies.
While maintaining that sharply increasing the cost of electricity would put it on a firmer footing, Eskom has said it is willing to look at other options.
President Thabo Mbeki and key ministers initially supported the utility’s electricity price proposal but have since backed off in the face of ANC opposition. Mbeki lost the leadership of the ruling party to rival Jacob Zuma late last year.
Eskom’s management has played down hopes it could increase electricity supplies quickly and has asked that consumers be patient while it builds new generating capacity.
Eskom said on Friday it had awarded a R2,9-billion contract to a consortium of local companies to construct the main civil works of its Medupi power station. The total cost of the project is around R80-billion.
”Medupi is one of the key installations in Eskom’s new build programme that is geared towards closing the current supply-demand gap,” Brian Dames, Eskom’s chief officer for generation, said in a statement. — Reuters, Sapa