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Domino effect: SA economy takes another hit on news that Eskom can hike tariffs by 15%

(Photo: Dwayne Senior / Bloomberg via Getty Images)

Will the litany of bad economic news ever end? The Gauteng High Court has ordered that Eskom can reap another R10-billion in the 2021/22 financial year, which means an effective increase in power prices of more than 15%.

Eskom’s woes translate into woes for the entire economy of South Africa. The state-run power utility’s inability to provide reliable power is a huge obstacle to investment, economic growth and job creation. Then there is the issue of soaring prices for its sputtering service. Prices are about to jump by more than 15% in the coming financial year, adding an additional cost burden to South African industry and consumers just when they are least able to absorb it. 

“The National Energy Regulator of South Africa (Nersa) announced… that the High Court of South Africa (Gauteng Division) has ordered that an amount of R10-billion be added to Eskom’s allowable revenue to be recovered from tariff customers in the 2021/22 financial year,” Nersa said in a terse statement on Tuesday. Eskom has long complained that Nersa has awarded it lower increases than it had applied for, worsening a spiralling financial crisis.

The upshot is that “this will result in an average tariff percentage increase of 15.63% in the 2021/22 financial year”.

Inflation in December was running at 3.1%, so such an increase will effectively be five times the current inflation rate. Inflation remains muted against the backdrop of a fragile economy with an unemployment rate well above 40%, based on its most telling definition. But the South African Reserve Bank has warned that administered prices – which include power tariffs – are an upside risk to the inflation outlook. Petrol prices are also bubbling at the moment, with more increases foreseen at the pumps in the coming months.

So this has the potential to nip further interest rate cuts in the bud. Then there are the rising power costs to business at a time when one of the many pledges to come out of President Cyril Ramaphosa’s administration is to reduce the cost of doing business. That is not about to happen for power-intensive industries such as mining, manufacturing and large-scale commercial agriculture. 

If there is a light at the end of this tunnel, it can’t be switched on, thanks to Eskom. BM  

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All Comments 8

  • Eskom works on a cost plus basis. There is no incentive on Management to contain costs. We are paying for years of mismanagement of a bloated, wasteful, operation. There will be no improvement until competent people are appointed in all positions and market related salaries are paid at all levels to run a lean, effective organisation. Customers that can pay are currently investigating methods to reduce power/go off-grid.
    Eskom is in a death spiral on their current course.

    • There will soon be no competent people left in this country to be appointed. They have either been ‘worked out’ of the SOEs (The ones who used to work there when the organisations were actually effective), or they are leaving in droves ([Mainly white] Youngsters who qualify from universities) to countries where their talents and knowledge and work ethic are appreciated.

  • Most rural smallholding and farmer customers get their electricity directly from Eskom – and there are tens of thousands of them throughout the country. The price structure for smallholding Eskom clients is a total rip-off. For example – this is what a monthly account shows (Feb 2021):
    Service and admin charge @ R 27.41 per day = R 767.48
    Network capacity charge @ R 33.01 per day = R 924.28
    [AND WE HAVEN’T SWITCHED ON A LIGHT YET]
    Network demand charge 538 kWh @ R0.3088/kWh = R 166.13
    Ancillary service charge 538 kWh @ R 0.0048/kWh = R 2.58
    Energy charge 538 kWh @ R 1.2538/kWh = R 664.86
    SO: for R 664.86 worth of actual electricity we are actually paying R 2525.33 (excluding the VAT) still to be added. The other charges are mostly just rip-off charges. I would love to go on to pre-paid as a rural customer but on enquiring they say they wont allow that.
    Well, with the increases occurring as they are its a ‘no brainer’ to go off the grid sooner than later as the pay-back time will get even shorter as the Eskom costs increase.
    Then I can also get my R 14000.00 deposit back. It would be an interesting calculation by an energy boffin to work out how much business Eskom would loose if X, Y or Z amount (percentage) of rural customers were to go off-grid, and how much they would be obliged to pay back in deposits. It could bankrupt Eskom – even more – if that is even possible.
    As Peter Pyke has commented, ‘Eskom is in a death spiral on their current course’. Duh !

  • Another example of ANC ‘blind justice’ (to quote Arlo Guthrie). The perpetrators of the disasters the SOEs have become swan around, free and comfortable with their loot, while ‘the people’ (who shall govern, remember?) bear the burden of their incompetence, corruption and recklessness. Seems fair and sensible to me… and to you?

  • They talk in court about recovering money from the consumer??? What about the consumer recovering from ESKOM the money that has been stolen by years of mismanagement, oversupply of people ‘running the business, critical under supply of people knowing how to run effectively a electric power supplier, fraud, corruption, you name it, nothing but disaster! Did the court think about that? Is there a way to go to take ESKOM to court demanding OUR STOLEN money back. The B….ds behave like we are the culprits as they have to retrieve, WHAT??? WE THE consumer have to retrieve!!!
    Stealing from a critical supplier to the extend that has been happening since the ANC cabal took over is pure treason nothing else. “OFF with their heads” as the Queen in Alice in wonderland used to say!

    • @Hans I support your point of view 100%. We should be allowed to recover all the stolen money from the anc, who positioned their useless cadres in management positions to ‘run’ SOEs. (Into the ground)

  • The never ending price increases, really since 2004, will continue until something breaks. This is unlikely to be for several more years as realistically per kWh prices are still quite low compared to internationally. Consumers both domestic and business will soon start to wake up and consider renewable energies. Starting with saving energy technologies such as solar water heaters, which can save between 35% and 60% of domestic electricity bills, they are essentially a no brainer solution for the 12 million electric geysers out there and repayment on investment as little as two years. By the time the price per kWh gets to R4.00 generating ones own electricity with solar PV will also become a progressive no brainer, as it will be much cheaper than Eskom or the reseller. Of course the government will try to screw it up and tax clean energy! but one lives in hope.

    • Bridget, how do YOU compare the electricity price to international. Surely not by just converting Rand into Dollar or someting similar? Just show us!!