Eskom hike could delay economic recovery

2010-01-21 12:50

ESKOM’s proposed tariff hike could delay the country’s economic

recovery, Business Unity SA (Busa) CEO Jerry Vilakazi has said.

“If the 35% increase is accepted by Nersa, we can wave goodbye to

an immediate recovery for South Africa’s economy,” he told a public hearing in

Midrand, organised by the National Energy Regulator of SA.

While Eskom’s proposed tariff hike would bring in R18.2?billion for

the first year for the parastatal, the cost to the country’s economy would far

exceed this amount. In the same time frame, South Africa’s economy could lose

R80?billion, he said.

“In the worst case scenario, 200?000 jobs would be lost.”

Another consequence for a company such as a gold mine would be a

R300?million per annum increase in electricity prices.

He explained that a 35% hike could also lead to consumer price

inflation rising 1.2%.

“And the pass-through effects would hit food prices.”

Vilakazi said Busa did not believe tariff hikes were the only means

whereby Eskom could continue supplying electricity.

“A clear policy is also needed on renewable energy and we need an

augmentation of funding for the national solar water heating system.”

Vilakazi said Busa wanted a national consensus on the utility’s

future capital expenditure funding policy.

However, the shareholder needed to participate further in


“The shareholder (the government) must provide further equity

injections to support its investment in Eskom. The basic principle in any

business is that the shareholder puts his money in and if he is unable to do

that, he seeks partners.”

Vilakazi said Busa further advocated that Eskom reduce its

expenditure growth by 1% per annum.

“If this was done it could generate a saving of R5.6?billion up to

the end of March 2015.”

Eskom’s funding model should strike a balance between tariffs, debt

and the injection of government funds.

Earlier, Eskom’s acting chief executive Mpho Makwana told the

public hearing it was in the national interest for Nersa to “choose

appropriately” when deciding on the tariff hike. “I still say the right decision

for Nersa’s panel is simple, 35%, 35%, 35%.”

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