Eskom price hike: ‘Daylight robbery’ will unite us

Eskom and its regulator will be facing increasing public anger over the coming months, but it will be largely misplaced.

It was clearly what trade union federation Cosatu had in mind this week but it took an affiliate, the South African Municipal Workers' Union (Samwu), to put it into words. Eskom's request for five consecutive years of 16% electricity price hikes should be resisted the way the e-tolling system had been, Samwu said, to force an immediate halt to a plan that constitutes "daylight robbery".

Cosatu was somewhat confused in its own response. Convinced that the National Energy Regulator of South Africa (Nersa) had already granted permission for the hike, Cosatu this week said it would "pull together a coalition of all interested parties to oppose" it and accused the regulator of approving the numbers "without applying its mind to the impact and the extent the decision will have on eroding the quality of life for South Africans".

It will not have to look far for allies. As was the case with e-tolls, the only loud voice in support of the tariff increase has been that of the government. Both the Democratic Alliance and the Congress of the People came out against the proposal, calling on Nersa to reject Eskom's application.

Other groups were slightly more cautious, such as Business Unity South Africa, which said it would need to study the application carefully. But various ratepayers' associations, smaller business groupings and non-governmental organisations said there was no need to consider the detail.

Groups in townships that have long been protesting against high electricity prices – including in Soweto, where non-payment for electricity averages more than 70% – were especially fierce in their condemnation.

Too expensive
"We wanted to stop buying our power from Ekurhuleni [metropolitan municipality] so that we can get it cheaper," said Solly Mokwena, a Tembisa resident who was involved in widespread protests in that township last year.

"Now Ekurhuleni is going to charge us much more, and even if we win and buy from Eskom it is still going to be too expensive."

Cosatu appears unlikely to win its e-tolls battle in the long run, but it did manage to force a delay in the system's implementation. It also managed to bring political weight to a phenomenon that is rare in South Africa, at least outside the condemnation of corruption: a protest movement with support from a broad cross-section of society with little regard for class or race.

In the protests to come as Nersa moves towards public hearings on the Eskom plan in the last two weeks of November and a decision planned for the end of February, this phenomenon will likely see a repeat.

The memory of the rolling blackouts of 2008 has largely faded and with it the willingness of consumers to accept emergency price hikes. Businesses large and small are concerned about the impact the more than doubling power prices will have over the next five years, if not because they are intensive energy users then because of the influence such prices will have on inflation and consumer spending.

Poor people with access to electricity already say they are unable to afford enough of it; those who are better off feel pressure on their pockets from every direction. And the majority of South Africans are angry, in a long-suffering kind of way, about what they see as the waste of tax money.

But municipal workers and ratepayers, as well as small businesses and the residents of informal settlements, may want to look closer to home for a more difficult, but also potentially more profitable, target for their outrage. Research by Eskom has shown that major municipalities impose a mark-up on electricity sales that starts at 40% and sometimes more than doubles the price. Independent research has reached a similar conclusion: the cut taken by local authorities makes up the single biggest component in the price of power for many users who have no alternative and no leverage.

The revenue municipalities bring in via that mark-up is a crucial part of their budgets. They use it to cross-subsidise everything from road maintenance to trash collection. And whereas Eskom has improved its efficiency – and has promised to cut R30-billion from its cost base over the next five years – most local governments have grown more wasteful. In cases where figures capable of being audited exist, audits reveal waste, misappropriation, misspending, a lack of cost-monitoring and spending on consultants that duplicate the tasks of full-time employees.

The wages of municipal workers have also risen much faster than those of Eskom employees.

Eskom has proposed increasing the rate paid by municipalities for electricity by 13% next year. Higher increases for industrial and agricultural users make up the difference, to increase its average price by 16%. Based on sales figures for the 2012 financial year, municipalities would share at least R2.5-billion in extra revenue if they were to pass that increase directly to residents. However, if municipalities were to hike their electricity price by less, say one-and-a-half times the rate of inflation, the actual increase for most consumers and small businesses could be in the single-digit percentages.

Nersa, which has yet to find its feet as a regulator, will in the coming months be put under huge pressure to deny Eskom the increases it is asking for – but will do so at its peril. As Eskom has made clear, its numbers make no provision for much-needed additional power stations that must be built in the not-too-distant future. South Africa's electricity plants are ageing fast and failing to replace them in time would be disastrous.

Yet the current administration has proved itself unable to take firm decisions on the long-term nature of the electricity market. The same indecision and delays by its predecessor plunged wide swathes of South Africa into darkness five years ago. A repeat of that a decade down the line must be avoided.

Just as the bulk of waste is not at Eskom, the most important locus of decision making is not with Nersa – even if public anger will inevitably take little notice of those facts.

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Phillip De Wet
Guest Author

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