As Eskom’s pro­posed mas­sive 19.9% price in­crease is dis­cussed and con­sid­ered, cit­i­zens and in­dus­tries alike re­act with out­rage and de­spair

CityPress - - Business - PETER LUHANGA busi­ness@city­

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.


SKY HIGH Sun­rise over power lines in the Free State. Eskom has ap­plied for yet an­other huge tar­iff in­crease that is much higher than the in­fla­tion rate

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