'If we want growth, we need more electricity'

South Africa had deliberately under-priced electricity in the past, Eskom chairperson Bobby Godsell said in Johannesburg on Friday.

“In the past, South Africa was not a popular destination for investment and so the government had to provide an incentive, and that was cheap electricity,” he told the Steel and Engineering Industries Federation of South Africa.

However, it had been unwise to set the electricity price below the real operating cost of producing it, Godsell said.

“The government did open up the electricity sector to new players but no one came in because the tariff was half of the cost of production.

“So we need to address the tariff,” he said, adding that a “systemic” change to South Africa’s tariff architecture was necessary and that tariffs had to increase.

Godsell said Eskom’s coal supplies for power stations were now at 42 days. “Last year the average was 12 days.”

Eskom was engaged in a capital-expenditure programme of R385-billion.

“This is four times the size of the Gautrain project,” he said.
“Our programme is on schedule and we think the cost may remain at R385-billion—or it could drop.”

Godsell said the debate around electricity in South Africa was not “an Eskom debate”.

“It is a South Africa Inc debate involving 48-million South Africans. If we want economic growth then we need more electricity,” he said.

Asked to discuss Eskom’s latest tariff application, Godsell said the 93-page document would be made public next week and he preferred not to comment at present.

This followed a leak to a news agency on Thursday that the parastatal had requested tariff increases of 45% a year for three years, ending on March 31 2013.

“We are going to be canvassing with the shareholder on the weekend and I don’t want to say anything,” Godsell said.

As electricity had been cheap, South Africans had used it very wastefully, he noted.

“But there’s lots of things you can do—get a solar geyser, use gas for cooking, change your lifestyle—these are things you can do to mitigate the tariff increase, Godsell said.—Sapa

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