Picture: Mike Hutchings/Reuters
Picture: Mike Hutchings/Reuters

Budget for 15% price increase, municipalities warned

By LOYISO SIDIMBA Time of article published Jan 9, 2020

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Johannesburg - National Treasury’s stance that municipalities should budget for electricity price increases of up to 15% for the 2020/21 financial year has been described as shocking by unions.

A municipal budget circular sent by the Treasury’s chief director for local government budget analysis Jan Hattingh on December 6, states that final electricity bulk price increases for 2020/21 are still uncertain.

”National Treasury’s advice to municipalities is to prepare scenarios for electricity bulk price increases in 2020/21 of between about 7% and 15%,” reads the circular.

But Cosatu affiliate the South African Municipal Workers’ Union (Samwu) labelled the Treasury’s advice to municipalities as shocking, and warned that the working class would not accept an increase beyond inflation.

According to Stellenbosch University’s Bureau for Economic Research, inflation is expected to be 5% this year and 5.1% in 2021.

Samwu spokesperson Papikie Mohale told Independent Media that Treasury always asks state employees not to demand above-inflation salary increases.

Mohale said municipal workers would oppose the possible 15% electricity hike.

”We will ensure that the decision is not implemented,” he said.

Mohale added that it was unjustifiable for a service provider, Eskom, that terminates services, to demand an increase of up to almost 17%.

The country has been hit by rolling blackouts since December and, despite President Cyril Ramaphosa’s promises that there would be no load shedding until Monday, electricity has been cut in parts of the country.

Mohale maintained that Eskom should focus on putting its house in order and that municipalities buying electricity from the power utility would include a mark-up when they resold to consumers.

According to Hattingh, the advice was given to account for the difference in financial years, and the potential outcomes of the court battle between the Nuclear Energy Regulator of SA (Nersa) and Eskom over the struggling power utility’s plans to raise R69billion through increased tariffs.

Nersa has granted Eskom between 5.22% and 9.41% tariff increases from 2019/20 to 2021/22.

Eskom disagrees with the way Nersa accounted for the R23bn a year in fiscal support from the government in determining Eskom’s allowable ­revenue for the current multi-year price determination period.

The power utility has taken Nersa’s decision to approve allowable revenue of R206.4bn for 2019/20, R221.8bn for the following financial year and about R233.1bn for 2021/22 on judicial review.

Eskom wants the North Gauteng High Court to urgently allow revised tariff increases of between 16.6% and 16.72% in 2020/21 and 2021/22.

Nersa is opposing the application, arguing that should Eskom succeed, electricity prices would increase.

Treasury has advised municipalities to take note that if the court’s decision in the Eskom and Nersa case is made next month to allow a higher bulk electricity tariff increase, the decision will likely be too late for it (Treasury) to make any changes to the equitable share allocations, which will be tabled in the Division of Revenue Bill on February 19.

Political Bureau

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