Eskom will increase electricity tarrifs by April. Photographer: Dwayne Senior/Bloomberg via Getty Images
Inflation and fuel prices for generating electricity will dig deep into the pockets of lower-income earners as Eskom goes ahead with its plan to increase tariffs to 12.74% from April.
This comes after a letter to National Assembly speaker Nosiviwe Mapisa-Nqakula by Minister of Public Enterprises Pravin Gordhan, which shows that, despite the outcry by civil groups about high tariffs posing a threat to livelihoods, the utility will implement the increases, which will push the tariffs to a high of 32% in two years.
Last year, Eskom received an 18.65% increase from the energy regulator of South Africa.
Gaylor Montmasson-Clair, a senior economist at the research institute Trade & Industrial Policy Strategies, and South African Renewable Energy Master Plan facilitator, told the Mail & Guardian: “When things increase rapidly way above inflation, it starts to seriously impact households in terms of their budget, and that very rapid increase is problematic because it doesn’t give households time to adapt, and also, it’s increasing much faster than inflation.”
Montmasson-Clair added that the high tariffs would cause a shift towards self-generation of electricity and further widen the gap between the rich and the poor. While the migration to self-generation gains momentum, high-income households will have a more structured electricity budget and would be less affected by tariff increases.
“People don’t have to be off the grid but having a backup system means that you can cut your electricity bill by half despite the increases that the government imposes on the country.”
He added that the rapid increases in inflation and tariffs had made South Africa’s electricity more costly than that in neighbouring countries.
The Reserve Bank, in its review of administered prices released in August last year, found that while South Africa’s average electricity price ranks competitively across business segments, residential consumers pay more than those in most African, Southeast Asian and Brics countries.
Among 147 countries, South Africa’s electricity price was the 62nd highest, placing it above the midpoint of cheap and expensive markets.
“South Africa’s electricity prices are slightly above the emerging market average of $0.11/kWh [R2.08],” the bank said.
The Trade Unions for Energy Democracy’s lead researcher, Brian Kamazi, warned that electricity tariffs were unlikely to go down anytime soon, adding that external factors, including the price of diesel internationally, also had an impact on the increase of tariffs.
Diesel is used to power the open-cycle gas turbines at the Ankerlig and Gourikwa power stations, in the Western Cape, which have a combined energy generation capacity of 2 000 megawatts. This is equivalent to two stages of load-shedding.
The gas turbines also make up for the shortfall in generation capacity when there are outages and breakdowns at Eskom’s coal-fired power stations.
Kamazi said because of ongoing defaults on payments of about R58.5 billion, Eskom would persist in raising tariffs nationwide to recoup money owed to them by municipalities.
“We are moving towards a regime with the breaking up of Eskom, and a move towards what’s called cost-reflective tariffs, where the idea is that the price you pay for electricity will be more reflective of what it costs to produce electricity. So, if it costs more to produce electricity, you will pay more,” Kamazi said.
“The hard fact is, if the cost is going up and the demand is going down, the only way Eskom can meet that shortfall is by subsidies from the government or raising prices or a combination of both.
“The solution is that the government needs to step in, and we need to abandon the unbundling process because, if not, the consumers will not be able to afford what’s coming,” Kamazi added.
The Reserve Bank recorded that, between 2007 and 2017, the average Eskom tariff increased by 333%.
“By 2022, tariffs had increased by 450%. Electricity price inflation has consistently exceeded headline inflation by a substantial margin, driving up the overall price level and impacting South Africa’s price stability. This is far higher than the 98% inflation over the same period,” it said.
Eskom has said that more double-digit hikes would continue to be required in the coming years.
Environmental groups have condemned the government’s proposal for an increase, saying that it was ironic that Eskom is behind schedule with its targets for the refurbishment of Koeberg power station in its efforts to extend its lifetime, but expects South Africans to pay for services not rendered.
“This remains unfair to South Africans who continuously face the imposition of new levels of load-shedding while paying more money for electricity they spend parts of the day not having,” said Francesca de Gasparis of The Southern Africa Faith Communities Environment Institute.
De Gasparis added that the government’s lack of effective energy planning is a “moral failure”.
“The IRP [energy blueprint] that was released in December has load-shedding set to continue for years. This latest plan for energy provision has been universally panned by energy experts as not based upon reality. The IRP is reflecting vested interests, not the interest of the people of South Africa.”
The tariff increases are unfair as South Africans will be paying for Eskom’s failure to provide electricity at a price affordable to consumers, De Gasparis added.
The Director of Earthlife Africa Johannesburg, Makoma Lekalakala, bemoaned the government’s delay in delivering electricity to the poor, adding that, “This tariff hike is like a denial of access to electricity to the marginalised and those living below the poverty line. How are the poor [going to be] able to afford these price hikes?”