Electricity price hikes : Laymen understanding

South Africans do not participate in the debate over the proposed increase in electricity prices due to complexities. Trade Unions, especially Numsa argues that the proposed hikes are going to lead to an increase in unemployment.

Some argue that intensive users such as steel makers and mines will be highly impacted. We have seen some utterance in the platinum sector intending to lay off 14000 employees. This is not related to electricity hikes.

Obviously all this costs will be passed down to consumers. The energy intensive user group argues that South Africa will be more expensive than the USA in all forms. This is when you include municipalities surcharges. The argument that South Africa has the one of the cheapest electricity is starting to wear thin when looking at the numbers.

With this increase Eskom will reap a further 140 Billion Rands. It is not clear where additional revenue is going towards. It is at least clear that government has intervened when coal supply to Eskom was threatened by preference to exports. A further argument that Eskom enjoys preferential rates.

Brian Dames, Eskom GCEO, explained that some of the R140 Billion will be used to pay current debts and contribute towards R340 billion build programme. There are arguments from some quarters that Eskom should depreciate its assets differently. Eskom needs do more work on convincing consumers, labour and man in the street.

From the layman’s perspective, this is as confusing as the reasons for eTolling. In the final it will hit hard.

 

About Motseki Majake

I am insurance professional helping clients with mass market solutions.
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