File picture: Reuters
JOHANNESBURG - The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) has opposed Eskom’s application for a 19.9 percent tariff increase, saying the increase would deliver “near fatal” blow to the struggling metals and engineering sector.

In a presentation to Nersa on Monday, SEIFSA Chief Economist Michael Ade said the increase would add to the strain of doing business in the sector. “A tariff will constrain output in the sector - with terrible consequences. The knock-on effect on costs, margins, production capacity and jobs in the metals and engineering sector will be catastrophic with additional social consequences,” said Ade.

He said SEIFSA was not in favour of a tariff increase. But if it was necessary to hike the electricity prices, Nersa should opt for a “much lower” percentage increase. “SEIFSA proposes a tariff increase no higher than Consumer Price Index (CPI). However, if an above-inflation tariff increase is necessary, it should not exceed the current South African Reserve Bank assumption of 8 percent, with no government support as the taxpayer will ultimately bear the burden of any government assistance,” said Ade.

The metals and engineering sector’s share in manufacturing output is nearly 30 percent and it contributes about 3.6 percent of gross domestic product to the South African economy. In 2016, it provided employment to around 480 000 people directly (514 000 including informal) and significantly contributed to employment in sectors with forward and backward linkages.

SEIFSA was among a number of companies and organisations opposed to the proposed tariff increase. These include the Chamber of Mines of South Africa, Business Unity South Africa, the South African Clothing and Textile Workers’ Union, the South African Local Government Association (Salga) and the National Black Consumer Council.

Nersa completed the public hearings on Monday and is scheduled to announce its decision on December 7.