How Eskom’s 16% hike affects you

By Bronwynne Jooste And Yolisa Tswanya Time of article published Oct 23, 2012

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Cape Town - The latest proposed electricity hikes could cripple businesses and lead to job losses and higher food prices.

The Cape Chamber of Commerce and Industry said Eskom’s proposed increases would be a “destroyer” of industry. It predicted scores of job losses in the city.

The National Consumer Forum said the possible hikes would have a knock-on effect on food prices and could lead to workers demanding higher salary increases.

Eskom is asking the National Energy Regulator of SA (Nersa) to approve hikes that would increase the cost of electricity by 16 percent a year for the next five years.

Last year, electricity costs rose by more than 25 percent. A similar hike is on the cards for consumers next year.

In its latest application to Nersa, Eskom is asking for increases over five years – from April next year.

Since 2008 the cost of one unit of electricity has jumped from just over 19 cents to 50 cents today.

It’s a bleak forecast for residents battling with higher food prices and regular petrol price hikes.

The City of Cape Town, which sells electricity to more than 500 000 households, has said it has noted a “slight increase” in the number of people not paying their bills after major hikes.

Peter Haylett, the chairman of the chamber’s industrial focus portfolio committee, said that with the proposed hike, the electricity tariff would have increased by 300 percent over six years.

He said that a series of steep hikes had led many businesses to shut their doors or scale down.

In some cases, businesses passed the higher costs on to the consumer. But it was not always possible to do this.

Haylett said the effects of the higher costs were widespread, hitting consumers at the tills as well as top business people. He predicted that the “upper end” of the real estate market would take a knock.

“People are having to sell their homes and scale down.”

The National Consumer Forum said Eskom’s latest call for higher tariffs was “shocking”.

Thami Bolani, chairman of the forum, said it would have far-reaching effects on the economy. The proposed increase would be “way above” the inflation rate. It would lead to an increase in the cost of items like food, and this would have major effect on the cost of living.

“Workers could then demand higher increases. It becomes a cycle that never ends and messes with the quality of life and the economy. All South African citizens should stand together and challenge this.”

When Eskom increases its prices, the City of Cape Town has to pay a higher rate when it buys electricity in bulk from the parastatal. Some areas like Table View and Khayelitsha receive electricity directly from Eskom. The city serves the other suburbs.

Ian Neilson, deputy mayor and mayoral committee member for finance, said the increases the city transferred to residents were lower than Eskom’s hikes.

He said there was a “slight increase” in “non-payments” after hikes. However, the majority of city residents had prepaid meters. Before an increase, many residents bought more electricity than normal to “cushion the blow”.

However, more residents were turning to different forms of energy.

“Perhaps the main issue now and into the future is the increasing [use] of alternative energies for cooking – gas mainly – and for water heating, like solar water heaters and heat pumps. There’s been a marginal decrease in electricity sales in recent years.”


There is no way we can charge more, we’ll never have clients

A Cape Town hair salon said the planned electricity increases would hit its bottom line, as the business could no longer pass the costs on to its clients.

City Hair, in the Golden Acre, has a monthly electricity bill of about R2 500. And even if that bill skyrockets over the next few years, it would not hike its own prices at the same rate.

Maxine Davids, the salon owner, said it had built a solid customer base by offering “affordable rates”.

“There is no way we can charge more, you’ll never have clients. The salons that are more expensive hardly have clients. But this hurts your profit, but there’s nothing we can do.”

Davids said the business was heavily dependent on electricity to operate hairdryers, flat irons and ensure the water was always heated. “This is really not fair, the working class is barely keeping up.”

Peter Haylett, the chairman of the Cape Chamber of Commerce’s industrial focus portfolio committee, agreed that a business like Davids’s could not always simply hike its own prices.

“Some really don’t have that option, people could just start visiting less, having their hair-cuts at home.”


We buy R300 electricity every three days… it has to be done

Summer Greens teacher and father of one, Michael Guzana, says he and his family would “definitely feel the pinch” should the National Energy Regulator of SA (Nersa) approve Eskom’s proposed electricity tariff increase.

Guzana said he was already battling with his current monthly electricity bill, despite the 50 free units every month.

“R200 electricity per month used to go for the whole month, but now we have to constantly top up and keep buying again before the month ends.”

Guzana, who lives with his wife and six-year-old son Hluma, top, tries to save electricity where they can.

“It is amazing how much electricity we use as a family of three; I can only imagine how it will affect bigger families,” he said.

Guzana suggested that if the price hike went ahead, the government should subsidise electricity.

Eskom applied to the Nersa on Friday for a 16 percent increase in electricity prices each year for the next five years.

This would take the price of electricity from 61 cents a kilowatt hour in 2012/13 to 128 cents a kWh in 2017/18 – more than doubling it.

Colleen Naidoo, below, who runs a foster home in Mitchells Plain, said the cost of electricity was definitely one of their biggest expenses as they spent at least R4 500 on prepaid electricity a month.

“We buy R300 electricity every two days. It is a lot of money, but it has to be done because we can’t go without lights and I am too scared to use candles,” she said.

Naidoo currently cares for 10 children and seven family members.

She said most of the things in her house required electricity.

“The fridges and washing machines are always on and I think that is what takes up the most electricity,” she said. “We bought a gas stove and I used that to cook things that take longer to try and save the electricity because we couldn't cope with just the electricity.”

Naidoo said she was running the place with money she had inherited. She said she hopes that the money doesn’t run out anytime soon.

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