Johannesburg - Eskom is seeking a massive hike to its power prices, yet the majority of Cape Town township residents can’t afford the existing prices that the utility charges.
Like many residents living in the area, Kholeka Mbalo (35), a mother of three young children who is unemployed and survives on a child support grant, buys electricity which she uses to cook only when the children are back from school.
During the day all electrical appliances are switched off because electricity is unfordable to the majority of residents living in the townships.
Mbalo, who lives in East Zwelitsha township in Nyanga, shares an RDP house comprising three rooms – a kitchen, a dining room and a bedroom – with 12 family members.
She was one of the members of the public who came to participate in the Cape Town hearings on the proposed 19.9% electricity tariff hike sought by Eskom.
“They [Eskom] shouldn’t be allowed to increase electricity prices. At least, they should be allowed to increase their prices after five years, not yearly,” Mbalo said.
The first leg of a series of national public hearings was held for two days in Cape Town this week.
Making a submission to the hearings for Cosatu affiliate the Southern African Clothing and Textile Workers’ Union (Sactwu), researcher Etienne Vlok told the four-member panel of the National Energy Regulator of South Africa (Nersa) that Eskom’s proposed tariff increase would compound pressure on the clothing, textile, footwear and leather manufacturing industry, in which most of Sactwu’s members work, and would pitch already struggling companies into free fall.
It will also, Vlok continued, catalyse retrenchments and factory closures as well as deindustrialisation, particularly impacting capital-intensive textile factories.
“It [the proposed tariff hike] will cause further downstream instability for clothing and textile producers – the very labour-intensive parts – and further loss of confidence in South Africa’s economy and withdrawal of existing and future investors,” said Vlok.
He added: “Job losses and unemployment will increase, and future employment growth opportunities will be squandered.”
Nersa chairperson Jacob Modise criticised Eskom for being selfish by looking at its balance sheet and not considering how the electricity increase would affect the entire economy.
“If you are a monopoly, why can’t you consider a balance between your financial sustainability with the rest of the economy?” questioned Modise.
He also questioned Eskom’s contribution to GDP if it was justified to increase the tariffs.
“What is your contribution to the GDP, just Eskom only, their contribution to the economy; what about all the agriculture companies ...
"So you would rather have the entire manufacturing industry shut down because of higher tariffs; entire economies shut down just because of high tariffs; just because you are selfishly looking at your tiny contribution to the economy?” he queried.
Cape Chamber of Commerce CEO Sid Peimer said there was a fundamental change taking place in the electricity industry, with an increased uptake of renewable energy, as evidenced with the rapid growth of the solar industry.
“In these circumstances, a 19.9% increase in electricity tariffs will mean that more people will find ways to use less electricity.
"Eskom is in a situation where its costs are increasing while its sales are decreasing. The utility death spiral,” said Peimer.
Eskom’s acting chief financial officer, Calib Cassim, said the 2018/19 revenue application was a one-year application.
Cassim said this financial year, the last year of multiyear price determination (MYPD) 3, which is in it’s fifth year, Nersa awarded Eskom an allowed revenue of R205 billion, which equated to a 2.2% price increase, off this base, and is the application for 2018/19 submitted to the regulator for review and adjudication.
Within this application, Eskom has made a number of assumptions, including the phasing in of the return on assets in terms of the MYPD methodology.
“Eskom believes that, with this application, we have made every attempt to extract efficiency to the business and try to limit the cost escalations from the base that we are coming from as close to inflation as possible,” said Cassim.
Eskom’s interim CEO, Sean Maritz, said the electricity tariff application was being reviewed at a difficult time for the power utility.
He said his executive team and the Eskom board viewed allegations of irregularities in a serious light and have laid out corrective action for the future – with ethics and governance taking centre stage and integrity driving the business as a core value.
“To demonstrate a shift towards positive change, we have suspended several executives due to their alleged involvement in governance irregularities,” he said.
He further said that Eskom should not be judged by the mistakes of “a few – mistakes that have cost us dearly and that we cannot allow to be repeated in future”.
Nersa’s head of electricity Mbulelo Ncetezo, who was chairing the public hearing, said Eskom was entitled to apply for tariff increases and Nersa was under obligation to consider Eskom’s application.
“People can say give them zero percent increase, but with us [Nersa] we must give reasons based on Nersa’s Act. We can’t act on emotions; we must be very technical.”
He said Nersa would give its final decision on December 7.