Cape Town - Finance Minister Enoch Godongwana on Wednesday said that the National Treasury was in support of the 18% electricity tariff increase for municipal customers that will be effective from July because it was reflective of Eskom’s costs.
Godongwana said he supported the tariff in the current economic environment precisely because he was dealing with Eskom debt.
“It is quite important that in doing so Eskom moving forward becomes viable.
“I know it costs the economy but at the same time there is a need to balance the cost to the economy and the survival of the institution,” he said.
Godongwana was responding during an oral question-and-answer session in the National Assembly.
“The position I occupy suggests that I take a particular view precisely because of the financial sustainability I need to protect,” he said.
Godongwana also confirmed that his department had engaged with the National Energy Regulator of South Africa (Nersa) prior its announcement of the electricity price increase.
He explained that tariffs were regulated by the Municipal Finance Management Act and the Electricity Regulation Act that empowered Nersa to determine tariffs to be charged by Eskom and municipalities.
However, Eskom was obliged to submit a proposal to the Minister of Public Enterprises, Pravin Gordhan and Nersa for approval after requesting the National Treasury and South African Local Government Association (Salga) to make written submissions that were to be included in the application to the minister and the regulator.
“The National Treasury engaged with Nersa as required in terms of the law.”
It was , however, pointed out to him that the indigent people were made to pay the price because municipalities relied on surplus from electricity sales to fund their operations.
Godongwana sad there was no doubt going to be a challenge for the funding model for municipalities.
He also said the key question is whether municipalities should rely on electricity sales as a source of revenue.
“That model is under threat as things stand. There is going to be a need for a separate discussion about the future sustainability of municipalities and what the appropriate sources of revenue are.”
Godongwana said the National Treasury had anticipated a tariff increase of more than 20% and allocated R1.1 billion to support the indigent.
Answering questions on his department’s intervention in assessing the quality of coal used in the power stations, Mineral Resources and Energy Minister Gwede Mantashe said the quality of coal going to the power stations was an operational matter and required the management of Eskom to verify the quality and the quantity that was supplied.
“I can assure you that in South Africa there is no shortage of coal nor (is) there quality of coal that is inferior. That is why ... I always ask the minister of electricity why Eskom opted to truck in coal instead of getting it from coal mines next to the power station so that coal can come to the (power station) on a conveyor belt?
“That debate has started and is serious,” he said.
“If you are taking coal through a conveyor belt, the coal will not be tampered with. It is more secure and protected,” Mantashe added.
He also said Eskom management has the responsibility and the duty to receive the quality of coal they require.
“It can’t be a departmental responsibility. Eskom has a management that should ensure the quality they get and quantity is what they agreed on contractually with a coal mine.”
The question was asked in the context of reports that Eskom was receiving poor quality coal that was tampered with by criminal syndicates who infuse it with rocks and rubble while transporting it to the power stations, and of quality coal being exported.