Tariff hikes could have been worse, say KZN business structures

2010-02-25 00:00

ALTHOUGH the decision by the National Energy Regulator of South Africa (Nersa) to grant Eskom substantial tariff increases over the next three years represents a big blow to businesses, business organisations in KwaZulu-Natal are grateful that Eskom has not been granted heftier increases.

Pietermaritzburg Chamber of Business CEO Andrew Layman and the chairman of the Infrastructure Committee at the Durban Chamber of Commerce and Industry, Professor Gavin Maasdorp, expressed similar sentiments.

Layman and Maasdorp said, however, that they are concerned about the tariff increases that the municipalities will eventually approve.

Maasdorp acknowledged that South Africa’s electricity capacity needs to be increased urgently.

“We do realise that a considerable increase was necessary in order to build the power stations to increase capacity. Electricity has been cheap for many years. We express the hope that provision will be made for IPPs [independent power producers] to enter the sector,” said Maasdorp.

Managing director of Pietermaritzburg-based Natal Rubber Compounders, Collin Stroberg, told The Witness that the company’s annual electricity bill surged to R3,8 million, from R2,6 million last year.

He added that the latest tariff hike will lift the bill to about R4,8 million annually.

He said the timing for the business could not be worse.

“In a time of recession, you just do not recover that money,” Stroberg said.

He added that although the business will be investing in more efficient motors, this will come at a social cost.

“The unfortunate thing is that it will reduce our staff complement,” Stroberg noted.

There are still widespread concerns that the tariff hikes threaten to lead to an increase in inflation and impact interest rates.

Nick McConnell, managing member of The Kendal Group, a small family-owned cosmetics manufacturer in Howick, told The Witness that although the company is not a major consumer of electricity, the tariff hikes will still put pressure on its cost structures.

He said the hikes will inevitably push up the cost of materials such as glass, cardboard, plastic inputs and chemicals.

“Our suppliers’ costs will have to go up … and this will push up our costs. The consumers will end up paying,” said McConnell.


According to figures released by the national energy regulator, Nersa, the average standard price of electricity will rise to 41,57 cents a kilowatt hour in 2010/11, 52,3 cents in 2011, and 2012, and 65,85 cents in 2012 and 2013.

The average township dweller can expect a 10,59 % decrease in the price of electricity from April 1, a 5,4% increase in 2011, and a 5,5% increase in 2013.

Generally, suburbanites will pay 5,2% less this year, but 13,23% more in 2011, and 13,5% more in 2012.

In more affluent areas, the price will go up by between 21,95 and 35,82%, with a 25,8% increase in 2011 and a 25,9% in 2012.

The decreases were not explained in the Nersa release.

An average household that spends about R500 on electricity could see its bill increase to R624 later this year. This figure will rise to about R785 in 2011 and R988 in 2012.

A household that spends about R200 on electricity could see its bill increase to R250 later this year. This figure will increase to R315 in 2011 and R396 in 2012.

These forecasts depend largely on the future tariff hikes at municipal level.

— Witness Reporter-Sapa.

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