2009-06-26 00:00

LOCAL businesses in Pietermaritzburg, particularly manufacturers who feel as if they are being treated as cash cows when it comes to electricity costs, are devastated by the decision of the National Energy Regulator of SA (Nersa) to grant Eskom a 31,3% tariff hike.

Many local manufacturers will probably have to fork out tens of thousands of extra rands every month as a result of the tariff hike.

One such example is the Willowton-based Natal Rubber Group of Companies.

MD Collin Stroberg told The Witness that their average monthly electricity bill is about R280 000. The latest hike will add an extra R80 000 to this figure, placing tremendous pressure on their business.

He added that the price hike also puts pressure on the viability of their planned R15-million expansion.

“It’s a big blow to our business. We can’t just put up our prices. We have to take that off the bottom line. Customers have been asking for price decreases … since the beginning of this year. Labour costs have also risen by 8,8% effective July 1. We’ve either got to box smarter or … close down a department where there is a high level of energy usage,” Stroberg said.

According to the MD of local manufacturer Pressure Die Casting (PDC), Mike Wolhuter, their average annual electricity bill already amounts to a whopping R3 million. The price hike will push this bill up by about R800 000 to R3,8 million.

PDC currently pays 20 cents per kilowatt hour (kWh). A tariff hike of either 27,5% or 31,3% means that PDC will now pay either 25,5 cents or 26,2 cents per kWh.

“Ironically, the higher the Eskom cost increase, the more money the municipality makes. If the municipality increased the electricity rate to companies by 15% versus the 31% cost increase from Eskom they would make the same rand profit. Any increase of more than 15% is ‘greedy’ and increases the revenues of the municipality and puts more businesses and employees jobs at risk,” argued Wolhuter.

Local manufacturing giant Hulamin told The Witness that the company is very dependent on electricity and uses 25 000 MW per month and 45 MVA maximum demand.

Hulamin said it is under severe pressure to reduce costs and can ill-afford a major increase in electricity costs.

Pietermaritzburg Chamber of Business (PCB) CEO Andrew Layman is also concerned about what the municipality will charge industry.

He said industry is often viewed by the municipality as a cash cow, adding that the municipality is still too reliant on electricity payments as a source of revenue.

Wolhuter and Layman pointed out that businesses also have to fork out a “maximum demand charge” in instances during the month when they reach a certain peak electricity usage.

Wolhuter said the municipality’s maximum demand charge margin is as high as 400%.

The PCB’s Layman said that he would like to see the municipality scrap the maximum demand charge margin as businesses effectively pay extra for electricity that they do not use.

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