The Steel and Engineering Industries Federation of South Africa (SEIFSA) has called for the unrestricted acceleration of private sector participation in the provision of power in the wake of last week’s massive 31,39% tariff increase granted to Eskom.
The National Energy Regulator of South Africa (Nersa) has allowed Eskom a hike in energy rates of 18.65 percent, effective in April, and 12.74 percent for 2024/2025.
This indicates that overall electricity price hikes over the next two years will exceed 30 percent.
Previously, the regulator authorized a 9.6% hike despite Eskom’s request for a 20% increase. Loosely translated, this indicates that consumers will have to pay more for their electric bills.
According to Tafadzwa Chibanguza, chief operations officer of SEIFSA, the announcement of a rate increase is regrettable and comes at a bad time, as Eskom, the state-owned power provider, is failing to provide service to its consumers.
“Increases of this magnitude add to the already high cost of living for many South Africans and increase the cost of doing business,” Chibanguza stated.
“While it is accepted that Nersa has a difficult balancing act to do, which includes safeguarding the long-term viability of the electrical provider, the timing of the rise is exceedingly unfortunate.
“The increase is granted at a time when Eskom cannot provide enough electricity to its consumers, a condition that is anticipated to persist for the foreseeable future. The indefinite proclamation of stage six power cuts, during which consumers are without electricity for 10 to 12 hours each day, is tremendously detrimental to enterprises and the economy.”
Cost to conduct business
According to Chibanguza, the tariff increase is a slap in the face for enterprises and corporations who have had to pay to keep the lights on during rolling blackouts, as they will have to pay more than the 18.65% and 12.74% increase.
According to him, the metals and engineering industry, which includes the upstream and downstream energy industries, would face the brunt of this price increase, and the consequences will be negative.
“Given their consumption, the cost of alternative energy solutions for energy-intensive upstream businesses is prohibitively expensive, so tying them to Eskom and exposing them to punitive cost hikes.
While downstream companies that are relatively less energy intensive are able to implement alternative energy solutions, the expense of operating these alternatives is prohibitive, according to Chibanguza.
As corporations continue to reduce expenses by sacrificing their long-term capital, Chibanguza stated that “long-term implications are emerging.”
“Companies are sacrificing long-term capital that could otherwise be invested in expanding their operations to pursue immediate survival with these few resources.
“The long-term consequences will be a continuous structural decrease in the performance of the metals and engineering industry, which has been observed at a compound annual rate of 1.6% since 2008.
“Employment in the sector, particularly among women and youth, has shrunk at the same rate over the same time period, contributing to the country’s existing socioeconomic disaster,” he stated.
According to Chibanguza, the nation’s current energy challenges necessitate a similarly vigorous response as during the Covid-19 outbreak.
“Only a clear, sincere, and dogmatic emphasis on structural reform in the energy sector will lead the nation out of this crisis.”
“While many initiatives in this direction, including the reforms announced by the president in July 2022, are commendable and represent a fundamental transformation in the management of the power supply industry, progress has been agonizingly slow to far.
“The severity of the situation and the economic risk necessitate a response as vigorous as that to the Covid-19 pandemic. The provision of consistent, dependable, and reasonably priced power is not just in the best interest of the private sector, but of the entire nation of South Africa.
Therefore, participation of the private sector in the provision of energy should be accelerated without restriction or delay.
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