Western Cape Business News

Send  Share  RSS  Twitter  14 Oct 2009

ELECTRICITY: Hikes A Death Blow For SME's?


Recent Western Cape Business News

IF the three increases of 45 percent which Eskom wants for each of the following three years are granted it will be a death blow for many businesses which have to use large amounts of electricity, says the Cape Chamber of Commerce.

Jeremy Wiley, President of the Chamber, said it would also lead to a new round of wage demands.

He pointed out that the increases would be compounded and the small business which now had a monthly electricity account of R1 000 would pay R1 450 from April next year, R2 102 the following year and R3 048 the third year.  “That means electricity bills will treble in three years and this is simply going to be unaffordable for many businesses while those that survive will have to put up prices. On top of that we are told that this will not be the end of the matter.”

He said it was difficult to understand the extraordinary demands of Eskom. “Virtually all their power stations are fully depreciated and South Africa still has abundant supplies of relatively cheap coal.”

Wiley said there were a range of questions that had to be answered in unambiguous terms.

How much is Eskom charging for the electricity it exports to Botswana, Namibia and Mozambique and will their prices also go up by 45 percent a year for three years?

How much are the aluminium smelters in KwaZulu-Natal and Mozambique paying for the enormous amounts of electricity they use and will those tariffs also go up by 45 percent a year? Jacob Maroga, CEO of Eskom, says Eskom is locked into long-term contracts and the price of electricity for the smelters will not rise by anything like 45 percent. What we want to know is the extent of the subsidy funded by all other SA consumers.  

Wiley said he was also concerned about the contracts Eskom had signed for the building of the new power stations “which seem to cost more every time one opens a newspaper. We have had reports that these are open contracts and there are no fixed prices so there is little incentive to contain costs. Suppliers throughout the world know that Eskom is desperate and desperate customers always pay more.

We call on Eskom to come clean and tell the full story so that we can tell whether drastic measures like the closing of the aluminium smelters have to be taken,” Wiley said

Confidence in Eskom had been shaken to the point where the private sector would be reluctant to invest in the utility. It was now time to look at selling one or two of the existing power stations to the private sector as this would raise capital and probably lead to an improvement in the management of the power stations.

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