Hikes will dam­age Eskom

Business Day - - OPINION -

The Eskom dis­as­ter has reached a stage where its prob­lems can no longer be solved by price in­creases and dras­tic ac­tion is now re­quired. In fact, price in­creases will make things worse and re­duce Eskom’s chances of re­cov­ery.

One of the prob­lems is that Eskom’s re­quest for three 15% in­creases over the next three years does not tell the full story. Reg­u­la­tor Nersa has al­ready granted an in­crease of 4.41% and when we add this to 15%, we are look­ing at an in­crease of nearly 20% in year one.

The next 15% in­crease will be ap­plied to a tar­iff that has al­ready been in­creased and the third 15% in­crease will ap­ply to a tar­iff that has al­ready been in­creased twice, so the to­tal in­crease over three years will be nearly 59% and not the 45% that has been re­ported.

The sec­ond prob­lem is that de­mand for elec­tric­ity is fall­ing and will con­tinue to fall as peo­ple turn to al­ter­na­tives such as gas, more ef­fi­cient elec­tric ap­pli­ances and LED light­ing. The only so­lu­tion is to re­duce costs. We know from in­de­pen­dent stud­ies that Eskom is over­staffed by about 60% and that salar­ies are much higher than sim­i­lar util­ity com­pa­nies in other coun­tries. Eskom has made a start with dras­tic cuts of its ex­ec­u­tive and man­age­ment staff, but it needs to do this at all lev­els of the or­gan­i­sa­tion and do it quickly.

The third prob­lem is that a 59% tar­iff in­crease over three years will push many com­pa­nies and house­holds to de­cide to in­stall so­lar pan­els. Pho­to­voltaic so­lar pan­els al­ready make eco­nomic sense, and with a 59% tar­iff in­crease in the pipe­line, go­ing so­lar is now a no-brainer for many.

Ja­nine My­burgh, Pres­i­dent, Cape Cham­ber of Com­merce and In­dus­try

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