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CAPE TOWN - Power utility giant, Eskom’s proposed 19.9% electricity hike will severely cut jobs in the steel and engineering sector, says an economist for the Steel and Engineering Industries Federation of Southern Africa (Seifsa). 

Seifsa is reportedly set to make a representation at the National Energy Regulator of South Africa (Nersa) hearings in Midrand on Monday. "It will worsen the plight of the ailing metals and engineering sector", said Seifsa CEO Kaizer Nyatsumba. 

This proposed fuel hike comes after the sector has already lost a staggering 25 000 jobs between July 2014 and June 2017. 

"Job losses at that scale move SA away from the goals and objectives of the National Development Plan (NDP), which proposes the creation of 11m jobs by 2030 through, among others, the promotion of employment in labour-absorbing industries". 

According to Seifsa chief economist, Dr Michael Ade, a high electricity tariff increase will stifle output in the metals and engineering sector.  Ade added that the metals and engineering sector contributes nearly 30% in manufacturing output. This means that the sector essentially contributes nearly 3.6% of the gross domestic product to the South African economy. 

The endangered sector provided employment to approximately 480 000 people last year, said Ade. "An inevitable consequence of the proposed 19.9% hike by Eskom will be more job losses". 

If Nersa felt that an increase for Eskom is necessary, then it should be implemented at a much lower percentage than proposed, concluded Ade. Meanwhile, Eskom has received a ratings blow from Fitch Ratings agency. The embattled power utility received a  long-term local currency issuer default rating (IDR) and unguaranteed local currency senior unsecured ratings of “BB+” on rating watch negative (RWN).

This comes after the ratings agency affirmed the government-guaranteed rand senior unsecured debt ratings at “BB+” and also placed the national long-term rating of “AAA” and the national short-term rating of “F1+” on RWN. 

In acknowledgement of the ratings knock, Eskom’s acting chief financial officer, Calib Cassim said:

Eskom’s acting chief financial officer, Calib Cassim, commented: “We note the decision by Fitch to place Eskom’s IDR on RWN, and this reflects the need for the ratings agency to assess Eskom’s links to the government, given weakening liquidity and funding access. Eskom is confident that the liquidity challenges it faces will be resolved”. 

Adding confidence to the blow, Interim group chief executive Sean Maritz said: “We remain focused on improving corporate governance in order to address liquidity challenges in the near term”. 


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- BUSINESS REPORT ONLINE