Commercial property will be hard hit despite Eskom’s revised tariffs
THE SOUTH African Proper ty Owner’s Association (Sapoa), the voice of the commercial property industry in South Africa, welcomes Eskom’s latest indication that it will now request a 35 percent increase, compared to its original 45 percent.
However, Sapoa believes the 35 percent increase will have a negative effect on the industry, already hard-hit by the recession.
Sapoa supports the interest from Eskom to partner with a private company (30 percent) in the new Kusile project as this would reduce the funding needed and is in line with international trends in the energy industry, says Douw de Kock, chairman of Sapoa’s energy efficiency task team.
“Despite indications that the worst of the recession is behind us, the effects are likely to remain in the longer term, particularly in the commercial property sector and more specifically the retail property sector. The compounding effect of three 35 percent increases translates into a 146 percent increase in the cost of electricity by 2012. Against a twoyear backdrop of an industry beset with higher-than-normal arrears, defaults and vacancies, this doesn’t bode well for the recovery of the commercial property sector.
“Facing the prospect of South Africa having the most expensive electricity in the world, it’s reasonable to expect that foreign investors would look elsewhere for investment opportunities, and again this will have a negative effect on the industrial property sector.”
He argues that the low cost of electricity has always provided an attractive and competitive edge for South Africa when energy intensive consumers were looking at foreign investment. Eskom’s increase will negate this.
”In preparation for the increasing costs of electricity there has been a movement towards creating more efficient environments. But, the cost of retrofits are high and where cash flows do not allow for such expenses, it’s expected that such projects will be on hold for the shorter term,” De Kock says.