Energy is the engine for economic growth and development in our country. The EIUG advocates for reliable electricity supply at an acceptable quality and at competitive prices, and for a transformative energy supply industry. In this regard, the EIUG has noted with shock and disappointment the Eskom price increase announced on 16 February 2021.
Prior to the COVID-19 pandemic and its devastating impact, our economy was fragile and stalling at levels incommensurate with the crucial development needs of our country, especially with regards to employment creation and poverty elevation. It is our firm contention that a major contributor to the poor economic performance has been the ever-increasingly unreliable electricity supply and unpredictable electricity tariffs. The supply and tariff price path uncertainty has undermined our economic growth efforts and in turn has had a negative impact on retaining employment and creation of jobs which our country so desperately needs. These factors are likely to accelerate grid defection en masse by the remaining industrial users whilst growth investment will be redirected to host countries where energy-intensive users can find stable supply at predictable and competitive tariffs.
Like the rest of the world economies, our members are busy coordinating and implementing efforts to recover from the devastating effects of the pandemic, only to be hit by this double-digit price increase. It is our view that such huge price increase, and those on the horizon, will nullify opportunities for any meaningful recovery and will result in a prolonged economic recession long after the rest of the world recovers. What is even more worrying is that, although no announcement has been made on the increases for the next few years, Eskom has already pronounced it is pursuing multi-year double digit increases.
This electricity tariff increase will have a profoundly negative impact on economic growth, employment retention and our competitiveness in international markets. It is also ironic that, in as much as the electricity consumers will be negatively affected by this increase, the consequence is that this will only accelerate Eskom’s own death spiral with ever declining sales and a growing cost base. The recent court challenges which Eskom has won are a sure indicator that there is still a long way before the electricity prices will settle to near inflation related rates, thereby further eroding investor confidence and stifling the appeal of South Africa as an investment destination.
Despite the encouraging statements which were recently announced by our President in the SONA statement of 11 February 2021, this price increase takes us a several steps back from our national economic and social goals. We therefore call upon the government and all other stakeholders to urgently find a solution to Eskom’s operational and financial challenges. The electricity supply industry is need of a dire reform executed with intent and speed equal to the crisis at hand Special focus is needed on improving Eskom’s operational performance, internal cost efficiencies and collection of municipal debt.
NERSA also must ensure that as a country, we get to a point of having an electricity price path that is reasonably cost reflective, predictable, and globally competitive. At the same time, government must fact track progressive enabling policies and mechanisms to allow private sector to generate power for own-use and aid in closing the national power supply deficit.
As the EIUG, we remain fully committed to work with all the stakeholders, as part of the consultation process that our President has called for, and to assist in ensuring the realisation of the SONA announcements. The EIUG will thus continue to engage with Eskom, NERSA, government departments and other stakeholders in a constructive manner to raise our concerns and work with them in finding solutions.
Notes to the editors:
The EIUG was established in 1999, and is a voluntary, non-profit association of energy intensive consumers whose members currently account for over 40% of the electrical energy consumed in South Africa. As electricity is a key input to the processes of these organisations, it is the ‘life blood’ of our businesses. Our members collectively contribute over 20% to the GDP of South Africa and employ over 650 000 people across multiple sectors, including mining, quarrying, manufacturing, electricity, transportation, and water. The EIUG is dedicated to the promotion of the interests of energy users in South African Industry.
The EIUG is a consumer-led organisation working for the good of the country. The group strongly believes that energy is the engine for economic growth and development in South Africa. We are therefore committed to working with government, power utilities and other stakeholders to ensure South Africa has energy industries which provide reliable supply at acceptable quality and competitive prices.
Energy Intensive Users Group of Southern Africa NPC