By Shaanaaz de Jager, John Harvey and Barbara Hollands
A 16% ELECTRICITY hike in each of the next five years would spell disaster for consumers and businesses in the Eastern Cape as they would no longer be able to cover day to day living expenses and running costs.
That is the grim consensus of international companies and small businesses in the province, as well as the country’s leading economists, who this week dismissed Eskom’s proposal for the 16% hikes, calling it “the final straw” following several tariff increases by the power utility.
Although the National Energy Regulator of South Africa (Nersa) will only make its decision on the proposal after holding public hearings around the country, the Eastern Cape is already bracing itself for the hikes, which some business owners believe that, if implemented, will force them to shut shop.
The gravity of the impending increases is encapsulated by the fears of provincial motor industry giants General Motors South Africa (GMSA) and Volkswagen Group South Africa (VWSA), both of which feel the hikes would have an adverse effect on their operations.
“While the cost of electricity used to be a competitive advantage for businesses operating in SA, this is no longer the case. We are competing with other operations around the globe and need to demonstrate we are globally competitive in the critical areas of cost and productivity,” GMSA communications officer Denise van Huyssteen said.
“If we do not find more cost-effective and productive ways of doing business this will result in international companies relocating their operations to other more competitive countries.”
While VWSA spokesman Matt Gennrich was waiting for the increase to be ratified by Nersa, and believed the increment could be “closer to 14%”, he said such hikes would increase the company’s cost base and customers would suffer.
“But there will be no effect on production. We have many energy savings initiatives in the plant … which will help us to save energy and reduce cost where possible.”
However, it would be small businesses that would bear the brunt of skyrocketing power bills.
Jiannis Kosmas, owner of the Mykonos restaurant in Nelson Mandela Bay, said the hike would definitely force him to lay off staff and there was a strong possibility he would have to close his doors.
“We are already feeling the pinch because of the economy. This is a big thing for us,” Kosmas said, adding that 90% of his business relied on electricity and the rest was dependent on gas.
“What people must realise is that each business in town is an asset. If we close our doors staff will lose their jobs.”
Vincent Govender, the owner of Sea Breeze Takeaway in East London, said his electricity bill had tripled since he bought the small West Bank business six years ago.
“It is a nightmare and the new tariff increases will definitely push us under. It is not sustainable for a small business. We don’t even talk about profits anymore. It is so scary.”
Economists Mike Schussler and Neal Bruton believed the latest Eskom proposal would be “the last straw” for most South Africans. “This definitely puts us at a crossroads as a country. We are in a situation where in the past few years inflation has quadrupled. The fact is that we cannot be doing this the whole time,” Schussler said.
He said he was particularly sceptical of Eskom’s proposal because according to the power utility’s figures electricity usage had gone down by 2.8% since 2007.
“That means we no longer need that electricity, so this proposed increase is even more unfair. Then consider that unlike many countries in Europe we use our own coal and don’t have to pay for transport costs, nor do we have stringent environmental laws which carry a hefty fine if broken. This increase is incredibly wrong and quite frankly, no one can afford it.”
An equally incensed Bruton said the increase would have an “unavoidable” negative impact on consumption.
“Eskom seems to think the country’s monetary situation is a never-ending pot, but enough is enough for most South Africans. The fact is that increasing power tariffs will result in less consumption, and that in turn affects businesses and how many people they can employ,” Bruton said.
“Eskom has gone beyond what is tenable for the everyday citizen and business. It is completely unacceptable. Enough is enough.”
This is a shortened version of an article that appeared in the print edition of the Weekend Post on Saturday, October 27, 2012.