South African businesses challenged by electricity tariff hike
The National Energy Regulator (Nersa) recently announced an alarming price hike in South African electricity tariffs for the next three years. Despite being a far cry from electricity public utility company Eskom’s original requested increases of 17.1%, 15.4% and 15.5%, current rates are still disconcerting to businesses and consumers nationwide.
Nersa’s Multi-Year Price Determination currently sits at 9.41% for 2019, 8.10% for 2020 and 5.2% for 2021. These increases are set to help the debt-stricken Eskom recover a total of R661.301 billion from customers throughout the period. If the economy-damaging increases weren’t enough, it seems as though they’re not being implemented fairly.
Some property owners in Cape Town have been paying increases up to 30%, putting it well above average. For homeowners with properties worth over R1 million, a surcharge of around R150 has been imposed - regardless of their power usage. Additionally, these residents will be subject to a flat rate of 10%.
Customers whose monthly usage was more than 450 units across the past 12 months will no longer receive free electricity units. Compared to homeowners who consumed more than 600 units, “lifeline” customers who used over 350 units had to pay the same rate of R2.4214 per KWh.
Petition to Lower Tariffs
Calls have continued for Nersa to reconsider the increases and for the municipality to look into the new charges. An online petition in Cape Town quickly garnered over 5,000 signatures, pleading to Premier Alan Winde to immediately drop electricity tariffs.
Founder of Stop the City of Cape Town organisation, Sandra Dickson, told IOL that they fully support the campaign and that property valuations are being affected by these tariff hikes. City Spokesperson Luthando Tyhalibongo’s claim that much work was done to ensure the tariffs were affordable as possible, were naturally met with widespread disbelief.
Effects on Business
Dawie Roodt, an economist at Efficient Group, explained to IOL in another report that said tariff increases will lead to the closure of small businesses in South Africa. Due to the subsequent drop in economic demand, retailers won’t be able to pass on the increase to consumers.
South African business owners are urged to look into alternative energy sources, while those who lack the capital to afford solar or wind power should find new suppliers for their business electricity needs. Websites that offer a business electricity comparison would be a wise place to start, as business owners can compare quotes between suppliers.
Of course, another effect is that businesses will need to make adjustments to their employment strategies. This might mean job losses, as well as an increase in the price of goods and services.
Durban’s Chamber of Commerce and Industry president Musa Makhunga exclaimed that these price hikes will have far-reaching consequences on the economy. Job creation and economic growth will suffer as a result.
Food processors will pass the economic burden onto consumers as farmers and the food industry as a whole will also be severely impacted by the tariff increases. It’s up to Nersa and Eskom to reconsider the price hikes and save the economy.