Com­mer­cial prop­erty will be hard hit de­spite Eskom’s re­vised tar­iffs

Weekend Argus (Saturday Edition) - - PROPERTY -

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.

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