Herman Mashaba. Picture: ARNOLD PRONTO
Herman Mashaba. Picture: ARNOLD PRONTO

Johannesburg mayor Herman Mashaba, the City of Johannesburg, City Power, the National Union of Metalworkers of SA (Numsa), the Minerals Council SA and the DA are united in their opposition to Eskom’s application for an electricity tariff hike, a National Electricity Regulator of SA (Nersa) panel heard in Soweto on Friday. 

They say it will punish law-abiding citizens, cripple the poor and working class, and sound the death knell  for mining.

In his submission to the panel, which is conducting public hearings on Eskom’s application for a 15.5% annual increase over the next three years, Mashaba said 45.2% of Johannesburg’s residents   live below the poverty line. At least 900,000 residents  are unemployed and the economic growth outlook  stands at 1.7%. Inflation  is expected to average 4.8% in 2019, 5.3% in 2020 and 4.8% in 2021.

“Given this context what is being proposed is unacceptable. If Nersa grants Eskom’s request of 15%, per year, over the next three years, the compound tariff increase by 2020/21 will stand at 608% over the last decade,” Mashaba said.

He said Eskom is effectively asking that the residents “foot the bill for decades of maladministration and mismanagement”.

“The proposed tariff increases would punish ordinary, law-abiding residents, while corrupt politicians and individuals responsible for the state-owned enterprises's downfall are allowed to walk free,” Mashaba said. 

City Power questioned the asset valuations that Eskom  has undertaken to justify its tariff increase application as well as its other cost and revenue calculations.

The City of Johannesburg highlighted the high and ever-increasing cost of doing business and that increased electricity prices  affect overall economic growth negatively.

“Increased electricity tariffs will increase the cost of production, consumer products and the cost of living while simultaneously impacting economic growth. Alternatives to tariff increases are available and it is imperative that national government exhaust those avenues before punishing the people of SA,” the city said in its submission.

Numsa rejected Eskom’s application, saying a tariff hike  is not in the interests of the working-class majority and the poor.  

“If energy prices go up, it will mean the costs of all basic goods, food, transportation, etc will also go up and this will worsen conditions for the poor and the working class. This will also affect small and medium firms negatively as the high cost of energy will impact negatively on the bottom line, resulting in massive job losses,” Numsa said.

The trade union argued that Eskom  cannot justify its application when its board, the state as the shareholder, and the senior executive management team  have taken decisions that  brought Eskom to the brink of collapse.

Minerals Council SA chief economist Henk Langenhoven argued that the increase  will herald the death of the mining industry. 

“At the prevailing gold price and taking into account current inflationary pressures, the proposed tariff increase will virtually eliminate the entire gold mining sector, rendering 95% of all gold mining operations marginal or loss-making in a short period of three years, threatening around 98,500 jobs,” Langenhoven said.

“Similarly, the impact will be severely felt in the platinum industry where around 37,600 jobs would be jeopardised if current inflationary pressures are taken into account.

“If history is anything to go by, the 15.5% annual electricity tariff increase currently being applied for by Eskom will cause considerable damage not only to Eskom’s mining customers but to the utility’s income and future.”

DA MP Natasha Mazzone said Eskom  needs a “complete overhaul”.

She said the party  has developed an amended Independent System Market Operator Bill, which  seeks to break Eskom up into two separate entities, generation and transmission.

“The Ramaphosa administration, which is devoid of its own vision, has only now started to debate this approach,” Mazzone said.

The expert task team appointed by Ramaphosa has recommended that Eskom be broken up into two state-owned companies: a generation company that would run Eskom’s power stations, and a transmission company that would own and operate the national grid. Ramaphosa is expected to make an announcement in this regard in his state of the nation address on Thursday.

ensorl@businesslive.co.za