High tariffs a threat to business

With its most recent application to the National Energy Regulator (Nersa), Eskom hopes to recoup in the region of R783bn over the next three financial years – by increasing electricity tariffs across its consumer base.

Eskom’s MYPD3 regulatory clearing account year five application is aimed at covering a shortfall of R21.6bn from the 2017/18 financial year, while the MYPD4 revenue application is aimed at raising R219bn in 2019/2020, R252bn in 2020/21 and R291bn in 2021/22.

Let’s put these staggering numbers into perspective.

In his budget speech earlier this year, then finance minister Malusi Gigaba included the following priorities for the 2018/19 financial year:

● R200.1bn for economic development, including innovation, science and technology initiatives, job creation efforts, industrialisation and economic regulation;

● R351.1bn for learning and culture, which covers everything from basic education to skills development and the National Student Financial Aid Scheme and

● R205.4bn for healthcare across the entire country.

Combined, the annual spending for these three crucial areas still falls around R27bn short of the total Eskom hopes to raise.

If these proposals are left unchallenged, they could mean a tariff increase in the region of 20% per year over the next three years.

This is not a sustainable scenario for any consumer, whether it is a household, a small business or a high energy industrial user.

In business, the rising costs of electricity remains an obstacle to business development.

Funds that could have been used towards expanding businesses and creating job opportunities are instead funnelled into paying high electricity bills and keeping the lights on – both literally and figuratively speaking.

With the next round of Nersa’s public hearings set for January 2019 – and the deadline for written objections and comments looming on November 30 – the business community is under threat again. There is no time to be idle. The Nelson Mandela Bay Business Chamber has been actively lobbying against unreasonable tariff hikes at Nersa’s public hearings since 2006, and we will continue these efforts during the MYPD4 application process and the municipal tariff determination that will follow.

In the past, the Business Chamber’s efforts to advocate against significant tariff hikes have proven successful.

At municipal level our metro’s industrial tariffs are among the lowest in the country, as a direct result of the Business Chamber’s unwavering commitment to the cause.

Since the 2013/14 financial year, our persistent engagement on this issue has contributed to industrial tariffs remaining as low as R1.12 per kilowatt-hour in the current financial year, while it would have risen to R1.47 without our involvement.

Our lobbying has also benefited consumers at national level, as the tariffs approved by Nersa apply across the country.

Last year, the tariff increase approved by Nersa was limited to 5.23%, in contrast to the 19.9% increase proposed by Eskom.

An increase of 6.8% (and 4.8% for time-of-use clients) was approved this year, which will take effect from April 2019.

We consider this cause so vital to the sustainability of business that we are engaging with other business chambers across the country, with the goal of collective advocacy against exorbitant tariff increases in future.

The Business Chamber believes that if we do not speak out against Eskom’s proposals, we become complicit in effecting tariff increases that could cripple the local industry and economic growth.

To us, an affordable supply of electricity is integral to doing business.

This is also why the Business Chamber took the lead earlier this year in a pilot project that resulted in significant savings for time-of-use businesses in Nelson Mandela Bay.

Representatives of our electricity and energy task team were instrumental in this pilot project.

The task team’s proposal entailed condensing the two daily peak periods into one, as these periods were disruptive to business operations.

This pilot was run exclusively in Nelson Mandela Bay during July and August this year.

According to calculations by the metro, this translated into time-of-use businesses saving on electricity costs to the tune of an estimated R20m – as a result of the task team’s lobbying efforts.

Although there are no guarantees that this pilot project will lead to a more permanent offering, the Business Chamber and its seven – soon to be eight – task teams will continue to defend the interests of business in the metro, from lobbying for reasonable electricity prices to reducing red tape and helping to ensure the city’s water supply remains sustainable.

Our efforts are driven by one particular vision: to enable sustainable growth, investment and job creation for the region’s business community.

This is why we will be present and vocal at the Nersa hearing in Port Elizabeth, which will be held on January 16.

It is why we will be present and be vocal each time businesses need a champion.

We are the voice of business – but in this cause, we need not be the only voice.

Will you join us?

If these [Eskom] proposals are left unchallenged, they could mean a tariff increase in the region of 20% per year over the next three years