HomeIndustry SectorsBusiness and marketsEd's note: Cost-reflective tariffs vs. the South African consumer

Ed’s note: Cost-reflective tariffs vs. the South African consumer

Last week I’d tweeted that working from home (WFH) post-COVID-19 could be a way to break South Africa’s current spatial disadvantages.

Originally published in the ESI Africa weekly newsletter on 29/07/2020

Poorer communities are more likely to be situated in outlying areas and people, therefore, spend a considerable portion of their income on travel expenses.

But for this work revolution to be successful we need affordable data and better coverage in these areas to open up the world of WFH.

That was last week.

Today my enthusiasm on how internet access can address job opportunities has waned in the face of the announcement that electricity tariffs will again increase. It puts a spoke in the WFH concept, which will rely on having data AND electricity—both of which must be affordable and with a reliable supply.

The latest court battle between the regulator and the power utility, which holds the monopoly, will see power tariffs increase from 116.72c/kWh to 128.24c/kWh in 2021. South Africans are thus faced with an almost 15% tariff increase. Under NERSA’s original determination, tariffs were meant to increase by only 5.22% on 1 April 2021.

The reason this went to court is that government had sought to give a R69 billion (spaced over three years) bailout for the financially unstable utility. However, the regulator saw fit to subtract this from the tariff determination, subsidising consumers but effectually altering cabinet’s intent.

It’s clear from the court judgement, which reads: “NERSA is precluded from making any adjustment or compensation to offset the R23-billion from the allowable revenue determined for these financial years or otherwise to deduct, directly or indirectly, the R23-billion equity injection from the allowable revenue for those financial years.”

Judge Kathree-Setiloane also described NERSA’s criticism of the power utility using a balancing mechanism as “bizarre”.  

With the next MYPD cycle due to start from 2022/23, the regulator will have to up its game if it is to perform on its mandate of setting and/or approving tariffs and prices.

The regulator appears to be fully aware of how ineffectual their performance has been of late. In early July, NERSA’s fulltime member for electricity, Nhlanhla Gumede, stated that the current methodology is no longer appropriate and is in need of an overhaul.

Gumede did not indicate what methodology would be used in its place but did suggest a formula similar to the one used to set petrol prices, whereby the price at the pump was adjusted monthly in line with visible indicators, such as changes to the oil price and the rand/dollar exchange rate.

Until then, and while Eskom continues to hold the monopoly, many South Africans will have no means to secure transformational job opportunities! Unless you have ideas on how to revolutionise the job market that I’m overlooking?

Stay safe. Until next week.

Nicolette Pombo-van Zyl
As the Editor of ESI Africa, my passion is on sustainability and placing African countries on the international stage. I take a keen interest in the trends shaping the power & water utility market along with the projects and local innovations making headline news. Watch my short weekly video on our YouTube channel ESIAfricaTV and speak with me on what has your attention.