Power price rises ‘will be bad for firms’

Omnia chairman says Eskom’s overspend on new stations worrying

OMNIA chairman Neville Crosse raised a concern yesterday that further double-digit electricity price rises were likely, saying this would negatively affect all industries and SA’s competitiveness.

Speaking at the release of the chemicals company’s annual report, Mr Crosse said: “Continuing and serious overexpenditure and delays in the construction of new coal-fired power stations by Eskom is indeed most worrying.

“Following the government principle of the user pays, this will mean further unaffordable double-digit electricity price increases will be highly likely. This can only hinder growth in all our industries with serious consequences for SA’s competitiveness,” he said.

Responding to concern about cost over-runs, Eskom spokeswoman Hilary Joffe said yesterday: “The project costs for the Medupi and Kusile coal-fired power stations have not increased. The cost for Medupi is R91.2bn, while Kusile is expected to cost R118.5bn.” Ms Joffe added that the power utility’s build programme was also on track.

Mr Crosse also urged the government to accelerate the timetable for the R845bn infrastructure programme.

He said the programme would stimulate growth in manufacturing, mining and agriculture — three key markets for Omnia. The government programme is also expected to stimulate growth at a time when private sector investment has lost momentum.

Commenting on Omnia’s annual report, Mr Crosse said weak domestic confidence and global uncertainty, “compounded by a lack of leadership driving the development of private sector growth”, had resulted in a dearth of investment projects in the domestic economy.

“The recent announcement by the government of an R800bn programme of investment into ailing infrastructure is to be welcomed. There is no doubt that such investment will promote growth in the manufacturing, mining and agricultural sectors and will be pre-eminent in economic growth and job creation. We encourage the government to accelerate the timetable for this worthy programme’s implementation,” he said.

Commenting on the factors affecting the company’s chemicals business, he said the South African manufacturing sector remained under pressure, “with its potential mired in policy bureaucracy, rigid labour laws, import substitution of locally manufactured goods and dwindling export competitiveness”.

Mr Crosse said growing the company’s chemicals division through acquisitions was under investigation, and opportunities in the domestic market would be evaluated. “However, the best opportunities for growth will be realised by increasing the footprint in the sub-equatorial African regions.”