Durban - South Africa’s “deeply indebted” consumers are in for a shock when electricity rates increase next year, making the poor poorer, forcing them to cut back on food and medication.
This is the warning from stakeholders, including ratepayer bodies, who said on Wednesday that the national energy regulator’s approval of Eskom’s proposed 12.69 percent electricity tariff hike for 2015/16 financial year would have dire consequences.
The National Energy Regulator of South Africa (Nersa) gave its approval on Friday.
However, the hike affects municipalities to whom the power is sold in bulk. The actual price municipalities charge consumers is yet to be determined, but the hike is expected to have a knock-on effect.
Neil Roets, chief executive of one of the country’s largest debt management firms, Debt Rescue, said on Wednesday the decision by Nersa would have “dire consequences” on the country’s “deeply indebted” consumers.
“Total consumer debt is now topping R1.44 trillion, according to Statistics South Africa. And the debt-to-income ratio is hovering around the 75 percent mark, which means that three quarters of a family’s income is already pledged to a variety of creditors,” Roets said.
“With the exchange rate now dropping on an almost daily basis, inflation on the increase and now a double digit increase in the electricity tariff, consumers are in for a very bumpy ride.”
Roets warned that the country’s “middle class”, which had only recently escaped the debt trap, were going to be forced back into poverty and for many, their only option would be to apply for debt counselling.
“Once under debt review, they will at least have a little breathing space to pay off their debts over a longer period of time while at the same time protecting their assets against seizure by debt collectors.”
Roets said debt counsellors were experiencing major growth, in large measure because of the deteriorating economic situation which was putting even greater pressure on consumers to make ends meet.
He said that according to the National Credit Regulator, the number of impaired accounts – accounts not paid for three months or more – increased from 19.27 million to 21.28 million in the second quarter.
The president of the Federation of Unions of South Africa (Fedusa), Koos Bezuidenhout, said they were concerned by Nersa’s decision.
“This above-inflation electricity tariff increase would have a negative impact on working people, the business sector and would put a further damper on future inclusive economic growth which will make South Africa a less competitive global player.”
Lilian Develing, chairwoman of the Confederation of Mist Belt Ratepayers and Residents’ Association, said a 9 percent hike would be more palatable.
“Pensioners are going to pay again. Nothing goes up by this much and they (Eskom has) got to have a legitimate reason,” Develing said.
“It doesn’t make sense. We are only seeing about this increase in newspapers. All these service providers are putting their weight on people more and more. People would now cut back on their food purchase and medication because they do not have enough income.”
Clairwood Ratepayers Association’s Rishi Singh said: “The bottom line right now we have an under growth economy. But placing the rates up will create more unemployment, poverty and cost people a lot of money,” he said.
“I don’t think it’s the right thing to do. It’s totally unwarranted, especially with the country’s struggling economy. It’s going to make the poor even poorer.”
Nersa spokesman, Charles Hlebela, said there would be an average one-off tariff increase of 12.69 percent.
Daily News