HomeSouthern AfricaInflation fears after Eskom's tariff hike

Inflation fears after Eskom’s tariff hike

26 June 2009 – The National Energy Regulator of South Africa (NERSA) granted a 31.3 percent tariff rise to utility Eskom on Thursday, short of its request for a 34 percent hike, fuelling inflation fears and provoking public anger from businesses and labour when it asked for the increased tariff to pay for new power projects.

Eskom, which provides 95 percent of the country’s power, is battling to meet demand in Africa’s biggest economy. Eskom has said the global economic crisis had badly hit its ability to borrow, and failure to grant it a significant increase would increase the risk that South Africa is exposed to in terms of security of power.

The tariff would run from July 1, 2009 to March 31, 2010, but the power regulator said South Africa’s poorest power users would only pay an additional 15 percent for electricity.

Eskom has said it plans to submit a new request later this year to cover a three-year period to the end of March 2012.

Critics say higher tariffs will add further pressure on consumers, struggling with the fallout of the global economic slowdown and South Africa’s first recession in 17 years.

South Africa’s energy and public enterprises ministries — which oversee Eskom and the energy sector — said in a joint statement the country was not an efficient user of electricity. It said tariffs have historically been increased at a rate lower than inflation, which was not commercially viable.

State-owned Eskom applied for the increase to help pay for its plan to expand power generation capacity over the next five years, which will cost 385 billion rand ($47.41 billion).