Eskom tariff hike would strain economy – BUSA

(Duncan Alfreds, News24)
(Duncan Alfreds, News24)

Johannesburg – An above inflation tariff increase for Eskom would add strain to an already struggling South African economy, said Business Unity South Africa (BUSA) chief executive Tanya Cohen.

According to a statement issued on Friday, BUSA believes such a hike without considering the impact on the economy and addressing the appropriateness of Eskom’s business model would not be justifiable nor sustainable.

Speaking this week at the National Energy Regulator of South Africa’s (NERSA) public hearings on the feasibility of the tariff hike, Cohen said: “The proposed tariff increase is not acceptable on a number of grounds including the immediate impact thereof on the economy and consumers and the longer-term impact on the financial stability of Eskom.”

BUSA believes the increase should not be higher than inflation and any hike should be on the basis that poor governance and corruption within Eskom is addressed.

“Nersa has the responsibility to ensure that any licensee operates in a manner that is free from corruption and in line with sound principles of good governance.

“A credible board and good governance needs to be restored to Eskom as a precondition for any tariff increase,” the statement read.

BUSA wants tariff applications to be for longer than a year as this will provide greater certainty to the public and the economy.

Earlier this week Finance Minister Malusi Gigaba, who was speaking at a business breakfast in Durban, said that Eskom’s 19.9% electricity tariff hike for 2018/19 is unjustified.

"To ask South Africans to pay more ... when the economy is subdued and the mid-term outlook is as subdued as it is and we have the types of financial and leadership challenges that Eskom is now experiencing, I think that will serve as a perverse incentive," he said. "We’ve got to be careful what we do."

Gigaba also called on the power utility to stabilise its finances and improve its governance.

The Cape Chamber of Commerce and Industry which also made a presentation at the Nersa public hearings said that the new increases would result in an average selling price of R1.07 a unit. According to the chamber, this means that Eskom tariffs have increased nearly fivefold in 10 years.

"The Cape Chamber of Commerce and Industry believes it would be counter-productive to approve Eskom’s application for a 19.9% increase in its electricity tariffs and a 27.3% increase in tariffs to municipalities. To grant these huge tariff increases would simply accelerate the pace of the utility's death spiral,” said Sid Peimer, executive director of the chamber.

Peimer proposed that Eskom focus on cutting expenses, even if it leads to job losses, Fin24 reported.

"Cutting costs is always painful, but it serves a purpose. There comes a time when medicine must be swallowed, no matter how bad it tastes," he said.


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