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Bonds could solves power woes
20/04/2008 11:54 - (SA)
Evan Pickworth
Johannesburg - If marketed correctly, electricity
bonds could help resolve the electricity price problem in SA.
Speaking during a media briefing, Dynamic Wealth chief economist, Professor Chris Harmse, said the incentive behind these would be that investors knew this was to bolster savings, and that if taken up it would mean Eskom was not going to increase electricity tariffs.
"You could introduce, say, a 2015 electricity bond with a 12% coupon and tell investors this means Eskom is not going to increase electricity tariffs," says Harmse.
He says instead Eskom was trying to make up a lack of investment over 15 years in just two or three years via big increases starting at a mooted 60% this year.
"But why not use bonds (to raise the capital)," he said.
"Policy can have an effect, as long as it is marketed correctly," says Harmse.
Eskom is currently proposing an increase of 60% this year, and 100% until 2009/10.
Analysts say these shock tactics are aimed at changing consumer
behaviour and also at increasing prices so that private distributors would get back into the industry, and companies would look towards co-generation by selling excess power to Eskom.
Harmse says SA "needs savings now".
He says SA needs to introduce savings incentives and accept
that a small budget deficit will be run.
"No one will ask questions if we run a 3% Budget deficit, as long as we use it for investment," he says.
"Rather use the surplus, as the incentives lead to savings which lead to investment," he explains.
"Why not make interest on savings a deductible?" he proposes, saying this was something done in the past.
"It's a way to get people to save," concludes Harmse.
SA's savings rate is currently at just 14%, with some analysts saying it needs to improve to around 25% to in turn boost investment and help plug the yawning current account gap.
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