At least half of the businesses that are members of the SA Chamber of Commerce and Industry (Sacci) will be forced to scale down operations if electricity tariffs rise by the 16 percent a year that Eskom is applying for.
A survey conducted by Sacci, in which 17 000 businesses participated, showed that because there was no room for businesses to reduce their electricity costs, more than half of the respondents would have to reduce their staff.
“It is tough times for business. We must caution labour as well about salary expectations when you have all these kinds of increases. Otherwise we would be seeing more of the Anglo American Platinum situations,” Sacci chief executive Neren Rau cautioned on Friday.
Sacci members said they could stomach electricity price increases of between 5 percent and 10 percent. If a 16 percent hike is approved, 78 percent of the respondents said their product’s competitiveness would be severely affected.
“Business prioritises sustainable electricity supply and we are willing to pay for it. That’s why we talk about 5 percent to 10 percent increases and not 2 percent. But our members are diverse. We have the big guys such as Anglo down to the guy who runs a shoe shop. So while 10 percent might seem affordable to some, others cannot even afford that,” Rau said.
He said the big issue for businesses was the extent to which municipalities increased electricity prices for their business and residential customers. Higher municipal charges for customers meant they had to reduce their spending and certain businesses would be the losers, Rau explained.
Sacci calculated what impact a 16 percent increase would have on businesses and the country’s economy, compared with a 10 percent rise.
The chamber found that at a 16 percent threshold, inflation would rise by 4 percentage points over the five-year period of the third multi-year price determination. It also found that gross domestic product (GDP) would decline by a minimum of 2.5 percent over the five years. Job losses were estimated at a minimum of 4.5 percent of total jobs.
With a 10 percent increase, Sacci calculated that inflation would increase by 2.5 percentage points. GDP losses would be in the region of 1.6 percent while 2.8 percent of jobs were expected to be lost.
“Our members’ comments and plans for dealing with these increases vary. For instance, one member said it would pin its long-term growth plans on markets outside South Africa,” Rau said.
Other businesses would not invest in local manufacturing or other operations that required intensive use of electricity.
Rau said electricity was not the only problem but the whole socio-political landscape was more of a concern to Sacci’s members than was realised.
The National Energy Regulator of SA (Nersa) will continue to hold public hearings in different provinces until the end of the month and Sacci said it would make its submission in Johannesburg.
Although protests in Port Elizabeth led to the adjourning of the hearings in the Eastern Cape, Charles Hlebela, the head of communications at Nersa, said the regulator would proceed with the schedule as it would not change the time frames for announcing its decision on Eskom’s application, which is set for next month.
Hlebela said the regulator was yet to make a decision on whether public hearings would be held in more than one district in the Eastern Cape as protesters in Port Elizabeth demanded that they be held in seven districts of the province.
The likelihood was that Eastern Cape hearings would be held when Nersa finished with the other provinces. Nersa would also go back to Cape Town as one day was not enough to listen to all submissions. Johannesburg was the only city where hearings were scheduled for two days.
Hlebela said picketing in Durban did not disrupt hearings as happened in Port Elizabeth.