Municipal tariff hikes deliver a shocking financial blow to workers

Prepaid electricity meters were installed in and around Johannesburg. Picture: Matthews Baloyi Independent Newspapers

Prepaid electricity meters were installed in and around Johannesburg. Picture: Matthews Baloyi Independent Newspapers

Published Jul 7, 2024


WHILE consumers will enjoy a slight decrease in fuel prices in July, there are still causes for concerns about monthly budgets as municipal tariffs have increased.

In addition to the 12.7% tariff increase, residents of the City of Johannesburg who use prepaid meters will face a recurring monthly fee of R200 for network and service charges.

The tariff hike and service fee came into effect on July 1, applying to middle and high-income earners. Indigent customers, however, will be exempted and have been allocated a slightly lower tariff increase.

Neil Roets, CEO of Debt Rescue, told Business Report that municipal electricity tariff increases will have a massive effect on over-indebted consumers, who are already facing financial difficulties.

“Many households already spend a significant portion of their income on utilities and this will add further financial strain and could push them further into debt. This rise in electricity costs may force them to make tough choices between paying for essentials like food and transport, worsening their financial situation,” Roets said.

He further said that while the fuel price decreases in July offer some welcome relief to consumers by slightly lowering transport costs, the savings are being counteracted by the recent municipal electricity tariff increases.

“Many households are already struggling with financial pressures and will find that any benefits from reduced fuel prices are quickly overshadowed by higher utility bills, leaving them with little overall reprieve from their economic challenges.

“Taking into consideration that motorists have already been hit very hard by four consecutive hikes in petrol this year, the small reprieve in June and July is a drop in the ocean for South Africans,” Roets said.

Meanwhile, Abigail Moyo, spokesperson of the trade union UASA, said: “The approved tariff hikes are a financial stretch for workers already bending backwards financially following Eskom’s 12.74% tariff increase earlier this year.

“The latest hike represents a shocking financial challenge for most workers. Electricity is a basic need that is fast becoming an unaffordable luxury, with only a handful possessing the financial ability to afford alternatives for their households and businesses.”

Moyo added: “Housing and utility expenditures regularly appear as primary contributors to consumer price inflation (CPI). The wide gap between inflation and tariff increases is especially concerning as it results in less affordable electricity for the average worker during winter when heating and cooking are more costly.

“Industries and small businesses are also affected as the additional operational costs may result in further job shedding. Eskom and municipalities’ woes remain the centre of our economic challenges, and the continuous financial burden dumping on consumers must be addressed and stopped.”

Moyo called on the new government to show its mettle, and demanded it starts by stop sucking the nation dry over basic needs.

“We trust that the energy utility and municipalities will be held accountable for their administration, expenditures, and service delivery to ensure that fellow citizens can squeeze out some value for their money despite the high costs,” Moyo added.

A stark reminder that consumers are facing a cost-of-living crisis and the state of the economy came this past week with the release of statistics for vehicle sales in the country.

Domestic new vehicle sales fell substantially in June by 14% to 40 072 units compared with the same month a year ago as the ongoing downward slope in the market that started last August continued.

The Automotive Business Council (Naamsa) said the decline was due to the constrained economic environment in the country, amplified by weak consumer and business demand.

Roets said: “There are multiple factors that contribute to the decline in vehicle sales, one of which includes consumers’ inability to afford new vehicles or secure financing due to bad credit ratings.

“Economic challenges, high interest rates, and the rising cost of living have further strained household budgets, making large purchases less possible.

“It appears that many consumers are opting to keep their existing vehicles longer rather than buying new ones as well. In light of the cost – more than 70% of all the cars in South Africa now cost more than R500 000 – this is not surprising.

“Another contributor to this is the poor performance of the local economy and the rand/US dollar exchange rate, which has made it notably more expensive to import and sell vehicles here in recent years.”