Eskom's request for a 15% tariff hike and the prospect of load shedding pose a massive challenge. How do we table a budget that is pro-poor while generating revenue to ensure investment in infrastructure, writes Herman Mashaba.
Recently I appeared before Nersa and made an impassioned plea on behalf of the residents of the City of Johannesburg urging them to reject Eskom's obscene request for a 15% tariff increase for each of the next three years. My argument was simple. The residents of the city, and indeed all South Africans, cannot be expected to shoulder the burden of Eskom's efficiencies and the impact of years of looting and corruption.
In the same week that we saw the return of daily load shedding, we were informed that Eskom is technically insolvent. Despite their inability to provide the country with a stable supply of electricity, Eskom's tariffs have risen by a compounded 368% over the past decade. Were Nersa to grant their last request for a 15% increase over the next three years, the compounded increase since 2008 would amount to 608%.
Eskom is now approaching Nersa with the argument that the only way to save the entity from collapse is to increase the cost of energy to consumers. Eskom is now holding the proverbial gun to Nersa's head in an attempt to have consumers subsidise a decade of corruption and mismanagement.As the mayor of Johannesburg, my perspective is that Eskom has become the greatest threat to Johannesburg.
The latest job stats released by StatsSA saw Johannesburg create 110 000 jobs net over the past year, resulting in a 1.1% decrease in the expanded unemployment rate. While I am encouraged by the progress we are making, I am mindful that we are having to reverse the staggering loss of 200 000 jobs in Johannesburg by the previous administration.
There can be no doubt that the reintroduction of daily load shedding will only make matters worse. Load shedding is job shedding; no economy can grow with the rising costs of an unstable electricity supply. When the multi-party government in Johannesburg took office in August 2016, we set the target of achieving 5% economic growth by 2021. Our ability to achieve that target will be greatly compromised if load shedding remains and the tariff increase is granted by Nersa.
In addition to the impact that this will have on the pockets of the residents I serve – residents to whom I have committed to running a pro-poor government – it will also compromise the City's ability to address our staggering R170bn infrastructure backlog.
The City faces similar challenges caused by years of neglect by the ANC in Johannesburg with 27% of the City's transformer network beyond its useful life.
Over the past two years the City has made progress to address these backlogs by increasing its investment into basic infrastructure and housing from 58% of the total capital budget in 2016/17, to 69% in 2018/19.
The reality, however, is that we still have a long way to go. One cannot address a R170bn backlog overnight. The progress we are making, however, will be stalled by load shedding and increasing energy prices.
Businesses will shut down, jobs will be lost and the City's rate base will inevitably shrink as the economy declines. With less money available to the City to invest in infrastructure, the City will be unable to provide the enabling environment required to attract new investment that creates jobs. The mutually reinforcing cycle of disinvestment and economic decline will continue.
In the midst of this storm, in the coming weeks I am required to finalise and table the City's draft 2019/20 budget including our tariff proposals for the new financial year.
Eskom's request for a 15% tariff hike, coupled with the prospect of daily load shedding, is posing a massive challenge. How do we table a budget that is pro-poor while still generating enough revenue to ensure adequate and much-needed investment into infrastructure?
The reality is that if Eskom is granted their request, as a pro-poor government we will be forced to limit the City's increases to other rates and services in an attempt to lessen the overall impact on residents. While this may provide short-term relief for residents, it will constrain our ability to deliver the quality of services our residents deserve.
The impact on the City aside, as a resident of South Africa I find our collective predicament reprehensible. The disaster that is Eskom, is a disaster of the ANC's making. Moreover, it is one that could have been avoided. All the warning signs were there; they were ignored. Eskom is now holding the country to ransom with the threat that without a further bailout or tariff increase, things will only get worse.
We should not tolerate either. What is most worrying is the lack of criminal charges against those directly responsible for looting Eskom. How can South Africans be expected to carry the costs of corruption while those who have put us in this position face no consequences? The only long-term solution to this problem is to remove the parasitic organisation that created it on 8 May 2019.
- Mashaba is the executive mayor of the City of Johannesburg.
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