Eskom’s proposed tariff hike could delay the country’s economic recovery, Business Unity SA (Busa) CEO Jerry Vilakazi said in Midrand on Thursday.

“If the 35% increase is accepted by Nersa, we can wave goodbye to an immediate recovery for SA’s economy,” he told a public hearing, organised by the National Energy Regulator of SA, on the proposed tariff hike of 35% every year for the next three years.

Though Eskom’s proposed tariff hike would bring in R18,2bn in the first year for the parastatal, the cost to the country’s economy would far exceed this amount. In the same time frame, SA’s economy could lose R80bn, he said.

“If the proposed increase is introduced we can say that in the worst-case scenario, 200 000 jobs would be lost.”

Another consequence for a company such as a gold mine would be a R300m/year increase in electricity prices. “The impact is the same for other leading industries.”

He explained that a 35% hike could lead to consumer price inflation rising 1,2%. “And the pass-through effects would hit food prices.”

Vilakazi said Busa did not believe tariff hikes were the only means whereby Eskom could continue supplying electricity. “Money for Eskom is available out there if the right conditions prevail.”

Vilakazi suggested the regulatory environment for electricity needed to be discussed and that independent power producers be given an enabling environment in which to operate.

“A clear policy is also needed on renewable energy and we need an augmentation of funding for the national solar water heating system.”

Vilakazi said Busa wanted a national consensus between the government, organised industry and labour and Eskom on the utility’s future capital expenditure funding policy. However, the shareholder needed to participate further in funding.

“The shareholder [government] must provide further equity injections to support its investment in Eskom. The basic principle in any business is that the shareholder puts his money in and if he is unable to do that, he seeks partners.”

Vilakazi said Busa further advocated that Eskom reduce its expenditure growth by one percent per annum. “If this was done it could generate a saving of R5,6bn up to the end of March 2015.”

Eskom’s funding model should strike a balance between tariffs, debt and the injection of government funds.

Earlier, Eskom’s acting chief executive Mpho Makwana told the public hearing it was in the national interest for Nersa to “choose appropriately” when deciding on the tariff hike.

“I have addressed hearings in eight provinces now and I still say the right decision for Nersa’s panel is simple, 35%, 35%, 35%.”  — Sapa

• Image credit: Paul Keller
  

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