Staggering electricity tariff hikes will hit consumers

SMALL businesses, farmers and consumers will be hard hit by economically “damaging” electricity price hikes following the National Energy Regulator’s (Nersa) announcement of price increases for the next three years.

Economists and consumer groups have warned that while it was a relief that Nersa’s Multi-Year Price Determination for 2019 to 2021 had granted lower price hikes than Eskom had applied for, the increases would be damaging to a weak economy, leading to job losses, yet probably not sufficient to keep Eskom afloat.

Nersa granted the parastatal price increases of 9.41% in 2019/20; 8.10% in 2020/21 and 5.22% in 2021/22, allowing it to recover revenue totalling R661.301billion from customers over the three-year period. Eskom had originally requested price increases of 17.1%, 15.4% and 15.5% respectively for the three years.

Nersa chairperson Jacob Modise said the extent of Eskom’s governance failures had not been quantified at the time of making the decision and the regulator might initiate an investigation into the parastatal that could result in adjustments to its revenue decision.

He said investigations by the Hawks, Parliament, Eskom or any commission of inquiry could also affect revenue adjustments.

Efficient Group economist Dawie Roodt said the price hikes would “damage” the economy and lead to the closure of small businesses.

“Retailers won’t be able to pass on the increase to consumers because of the very weak demand in the economy.

“Inflation is low and doesn’t allow you to pass price increases on because people know that inflation is running at around 4%. Any increase over 4% will face a lot of resistance,” Roodt said.

“They will try to pass it on but won’t be able to and I’m afraid that will be the end of many small businesses.”

Roodt said the increase was too high for business and consumers, yet insufficient to meet Eskom’s demands.

Durban Chamber of Commerce and Industry president Musa Makhunga said the chamber was “deeply concerned” about the price hikes which would have far-reaching consequences, impacting economic growth and job creation.

“It will negatively impact the Durban Chamber’s members and the business community at large, in particular those in energy-dependent sectors such as manufacturing, construction and tourism, as well as small businesses and entrepreneurs,” Makhunga said.

“Businesses will need to adjust further to the rising ‘costs of doing business’ and this may mean job losses and increasing the price of goods and services, which may make us uncompetitive.”

For farmers, FNB agribusiness head of information and marketing Dawie Maree said the hikes would drive up the cost of production for irrigation farmers, leading to food processors passing on increases to consumers.

“From a primary agriculture perspective, irrigation, fruit and vegetable farmers will particularly be impacted as they rely heavily on electricity for production. Farmers, just like consumers on the other end of the supply chain, are price takers,” Maree said.

SA National Consumer Union vice-chairperson Clif Johnston said the “double inflation” increases were bad news for consumers but at the same time it was a relief that Nersa had not granted the requested hikes.

“Nersa is competent to cut through the speculation and in continuing with their past history, they have not given them what they want, but they have given them enough to keep the lights on,” Johnston said.