Steep power price hike seen as disaster

LOUISE FLANAGAN

louise.flanagan@inl.co.za

IF ESKOM gets the price increases it wants, then thousands of jobs will be lost, some mines warned yesterday.

“The fallout here is going to be job losses,” said Peter Turner on behalf of mining company Gold Fields/Sibanye Gold.

Sibanye will be created when Gold Fields unbundles.

Turner, who is executive vice-president at Sibanye, told the National Energy Regulator of SA (Nersa) that job losses at Sibanye alone could run into thousands.

Nersa is holding public hearings around South Africa on Eskom’s proposed price increase. The Gauteng hearings started in Midrand on Wednesday and were due to end yesterday but were extended to carry on today.

Eskom is asking Nersa for a 16 percent-a-year increase in the price of electricity for the next five years. That 16 percent is based on different increases on the different Eskom tariffs, and heavy industry faces a 21 percent tariff increase.

Sibanye is a wholly South African company and the biggest gold producer in the country, said Turner.

The company’s 2012 power costs were R2.096 billion and the proposed increase would add another R350m to this year’s costs, despite cutting electricity usage. The company’s power costs have gone from about 9 percent of total costs in 2007, to 16 percent of costs last year, to a predicted 24 percent in 2017.

“We’d have 50 percent of our business underwater in five years,” said Turner.

He said this would mean closing sections of the company’s operations.

Giving examples, he said that if West Wits closed, it would mean the loss of 15 000 jobs. Free State operations likely to be affected would cost another 3 000 jobs, and another 2 000 jobs in indirect businesses would likely go too.

Turner said Eskom’s prices were doubling every four to five years and power prices were becoming a much greater proportion of running costs.

The Chamber of Mines said the 21 percent price increase couldn’t be done.

“The application is not affordable for the country,” said the chamber’s Roger Baxter.

The Chemical and Allied Industries Association said its members’ problems were compounded by the fact that many of them were municipal customers.

Municipalities add on a surcharge to electricity prices, and the association’s Laurraine Lotter said there were about 2 000 municipal tariffs.

She described a situation in which industries were moved between municipal tariffs, resulting in massive tariff increases of up to 70 percent.

“Where the tariff band changes, that’s opaque to Nersa,” said Lotter.

Some of the association members are heavy industry, so face the 21 percent hike.

Her association suggested a maximum increase of 10 percent.

“Sixteen percent is unaffordable. We think 10 percent is unaffordable. But 21 percent just goes beyond…” Lotter said, asking Nersa to scrutinise the Eskom application carefully to ensure every cent requested was justified.

Business has also spoken out against the proposed increase.

“The 16 percent is just unaffordable for South Africa in the present circumstances,” said Professor Raymond Parsons on behalf of Business Unity SA (Busa). “It will cause economic damage.”

Parsons said South Africa was already facing weak growth prospects, and a high electricity price hike would make the country increasingly uncompetitive.

“There are several sectors for which this decision will be a tipping point,” he said.

The Busa team identified about R150bn in savings that Eskom could make, and called for a lower price increase.

At the other end of the scale, representatives from community organisations told Nersa that the poor couldn’t afford any power price increase.

“Sixteen percent will create more poverty,” said Eunice Zungu, from Voices of the Poor.

She said the effect would be felt not just in the household electricity bills, but also in goods such as food and petrol.

“It will be more debt to the poor,” said Zungu, describing the difficulties of being 49 years old and unemployed – too old for employers to be interested but too young for social grants.

Like others concerned about the plight of the poor, she recommended solar power for households.