JOHANNESBURG, June 17 — A poposed 25 per cent hike in electricity tariffs by South Africa’s State-opwned power utility Eskom, if approved, will further cripple the already bleeding South African economy, says the Steel and Engineering Industries Federation of Southern Africa (Seifsa).
“The metals and engineering sector has been struggling for more than five years, owing to fierce import competition from Asian economies, industrial action, increasing production costs and power outages, among other factors,” its chief economist, Henk Langenhoven, said in a statement issued here Tuesday.
It said the federation had asked the National Energy Regulator of South Africa (Nersa) to reject the power utility’s request, as its approval would have a debilitating effect on the economy.
On May 8, Nersa said Eskom made an urgent application to increase electricity tariffs by 25.3 per cent for the 2015/2016 financial year. This included the 12.69 per cent price increase Nersa had already approved.
Nersa said in a statement at the time that Eskom had applied for the selective re-opening of the Third Multi-Year Price Determination (MYPD3) decision for the 2015/2016 to 2017/2018 period.
According to Eskom, this was because it needed cost recovery of 32.9 billion Rand (about 2.66 billion US dollars) for running its open-cycle gas turbines (OCGTs) with expensive diesel, and 19.9 billion Rand for the short-term power purchase programme.
Langenhoven said the stability of electricity supply and its costs were almost as crucial as its availability. Given the fact that the steel sector exported 60 per cent of its production, international competitiveness was vital for its continued survival.
“Electricity is an absolutely essential input for the metals and engineering sector. Exorbitant price increases will have a crippling effect on an already declining sector,” Langenhoven said.
He said the possible overall impact of the envisaged electricity price increase on inflation had been captured by the South African Reserve Bank. Its assumption was that any increase would only materialise in September, and that increases would return to /- 13 per cent in 2016/17 and 2017/18.