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Eskom’s price hike will hit jobs, place handbrake on economic growth

Critics have warned Eskom’s above-inflation increase will have detrimental effects on consumers and the economy.

The National Energy Regulator of South Africa (Nersa) announced that Eskom’s tariffs will increase by 9.4% in 2019, 8.1% in 2020 and 5.2% in 2021.

This is significantly lower than the increase that Eskom requested of between 15% and 17% but still higher than the inflation rate that’s currently sitting at 4%.

“This larger increase in electricity prices will eat into the already diminished income of the poor and lower income groups,” said the Democratic Alliance’s member of parliament Natasha Mazzone in a statement.

Mazzone said the increase will have a detrimental effect on small business, manufacturers and intensive electricity users “placing a handbrake on economic growth”.

Energy analyst Ted Blom said South Africans should expect more job losses because industry could not afford the increases.

“This announcement by Nersa of double the inflation for this year is going to damage the economy irretrievably. Nobody gets increases double the rate of inflation. Somebody is going to have to start switching off their lights and I suspect it’s going to be half of the South African population because they can no longer afford it,” Blom said.

Nersa’s decision cuts the revenue Eskom expected by around R101-billion, from R762-billion to R661-billion.

The power giant said it’s board will deliberate further before making a decision on how to respond to Nersa’s decision.

Eskom already has a court challenge to Nersa’s decision to allow it to claw back only R32,6-million or 4.41% from consumers for the previous three years. This is less than the R66.6-million that Eskom had asked for.

Eskom has challenged the energy regulator’s ability to calculate the tariffs it needs according to the regulatory policy and methodology.

“Eskom’s application was fully compliant and based on current methodology and regulatory policy. The underpinning of the principle was the need to ensure Eskom’s financial sustainability to enable it to fulfill its mandate to supply electricity to the country,” said Calib Cassim, Eskom’s chief financial officer in a statement.

The 4.41% increase will also come into effect from April 1 2018 which means the total increase for 2019 is 13.8%.

A note by Investec chief economist Annabel Bishop said that the higher than inflation increase will likely “place upwards pressure on CPI inflation in South Africa from July”.

The electricity hikes come on the back of a weaker rand and increases in fuel prices, sin taxes and other indirect taxes.

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Tebogo Tshwane
Tebogo Tshwane

Tebogo Tshwane is an Adamela Trust financial journalism trainee at the Mail & Guardian. She was previously a general news intern at Eyewitness News and a current affairs show presenter at the Voice of Wits FM. Tshwane is passionate about socioeconomic issues and understanding how macroeconomic activities affect ordinary people. She holds a journalism honours degree from Wits University. 

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