Eskom hikes a blow to economy
Eskom’s granted average 25% tariff increases of over the next three years will deliver a severe blow for job creation and investment in South Africa. This is according to economists and trade union Solidarity, who blamed the power utility and the National Energy Regulator of South Africa (Nersa) for the consequent loss of several thousands of jobs. Nersa announced that electricity tariffs would increase by 24.8% from April 1, 25.8% next year and 25.9% in 2012. This effectively results in an average standard price of 41,57 cents per kilowatt hour for 2010/11. For 2011 to 2012, it will translate into 52,3 cents per kilowatt hour and 65,85 cents for 2012/13. The state-owned power utility had applied for an increase of 35 % every year for three years to help raise funds for a R385-billion power expansion programme. Last year, Eskom increased its tariffs by 31%.
Devastating
Economist Clive Coetzee told the Zululand Observer the significant increases would have a major impact on industrial cities like Richards Bay. ‘While the increases are massive, it is still better than having blackouts,’ said Coetzee. ‘In the short-term, it is devastating news, especially for Richards Bay industry, but in the long-term it will prompt consumers to look into green technology. ‘It will also mean goodbye to low interest rates for the next four to five years as inflation increases. ‘The consumers will have to fork out costs, not business and not government,’ said Coetzee.
Solidarity spokesperson, Jaco Kleynhans warned that international investment in South Africa would drop dramatically because it would simply no longer be profitable to invest in the country. ‘Several international companies already investing in South Africa have already indicated they are not in a position to keep up with the regular Eskom increases,’ said Kleynhans. ‘The tariff hike will also cause South African manufacturers to fall behind in the race to be competitive, which will ultimately lead to labour cuts.’
The union also slammed Nersa, saying the public hearings meant to gather input from stakeholders were mere rituals and had no effect whatsoever on the predetermined decision.
