The South African Federation Trade Unions strongly opposes the three-year 15% tariff increase being demanded by Eskom.
If this is approved by the National Energy Regulator of SA (Nersa) on 1 February 2019 it will have devastating consequences for both individual consumers and the South African economy.
Consumers, particularly among the 30-million people who live below the national poverty line of R992 per month, are still reeling from last year’s hikes in VAT, petrol, the fuel levy, ‘sin taxes’, the road accident levy, and all the knock-on price increases which were passed on to consumers in the cost of goods in the shops.
A 15% on electrify tariffs, which will be even higher for those whose power is delivered by the local municipality who always add on a further percentage, will suffer yet another cut in their standard of living.
Many of the poorest 55.5% of the population already living below the poverty line will have to stop using electricity altogether. Using gas or coal heaters or candles for lighting will increase the risk of fire. Others, unfortunately, will resort to using illegal and dangerous connections.
As well as the impact on individual consumers, there will be a huge effect on the economy, for which electricity is its lifeblood, and which is already growing at a snail’s pace,. The impact will be the most severe in the mining and manufacturing sectors, which are already collapsing due to the strike of capital by investors and the continuing flood of imports.
A 15% three-year increase will drive hundreds of businesses either to retrench even more workers that those already in the pipeline, or even shut down altogether.
Those that continue to operate will try to recover their extra costs by increasing prices of their goods and services. The poor will therefore have to pay an even bigger price for the crisis in Eskom and the whole economy.
The mining industry, which is already in steep decline, could implode completely. Electricity prices for mining companies have risen by 523% since 2006. In addition mines suffered from the load-shedding during Eskom’s 2008 electricity supply crisis.
All this resulted directly in the loss of 18,300 out of the 53,500 jobs lost since then and the premature closure of old gold shafts, plunging employment in the sector to below 100,000 for the first time since 1905.
If Nersa now approves Eskom’s application for the three-year tariff increase of 15% a year, says the Minerals Council of SA, South Africa would be down to a single gold mine from 21, with production falling to just 20 tons a year, from 140 tons in 2018.
In 1994 gold mines employed 400,000 people and gold production topped 580 tons. Now, says Henk Langenhoven, chief economist at the Minerals Council, the consequence of these closures could be the loss of 150,000 jobs as these mines and other mineral producers, smelters and refineries cut back production to remove unprofitable chunks of their businesses.
“The 15% increase, which would result in a cumulative increase in prices of 75% by 2021, would seriously damage an already fragile industry,” said Langenhoven, “and put a large number of this core customer base out of business.
This means that Eskom would be cutting its own throat. it could lose revenue. As Langenhoven says: ”The number of mining and smelting customers would fall to 650 from 1,000 if tariffs of 15% were introduced and revenue would instead fall to R19bn as mines, smelters and refineries closed. They will accelerate their death spiral.
“Mining is a major source of demand for electricity, accounting for about a third of SA’s power consumption, and it is a key source of baseload demand. A 15% annual tariff increase would put a large number of this core customer base out of business, making a nonsense out of Eskom’s plans to double its revenue from miners, smelters and refineries to R50bn a year by 2021. if tariffs of 15% were introduced revenue would instead fall to R19bn as mines, smelters and refineries closed. They will accelerate their death spiral,” he said.
And these figures relate only to the mining sector! Every other sector would suffer from retrenchments, closures and bankruptcy, with catastrophic repercussions on Eskom’s revenue, the economy as a whole, and particularly on workers and poor consumers.
SAFTU appreciates the severity of Eskom’s financial crisis which has led to debt of R419bn, but totally rejects the idea that tariff hikes will solve this problem. On the contrary it will deepen its crisis by losing millions of rands in revenue from those who cut their their use of electricity or even stop using it altogether.
The federation is equally opposed to retrenchments as a solution, which is why we oppose the government’s disastrous Renewable Energy program, which involves the independent Power Producer (IPP) Programme would lead to the closure of five power stations, threatening the job security of at least 92 000 workers and their families.
This plan takes no regard for the crisis of unemployment which would be created as result of the IPP agreements without even a social plan in place for a ‘just transition’ to more environmentally friendly forms of power generation, particularly for the province of Mpumalanga, whose economy is almost entirely dependent on the presence of the coal-fired power stations.
SAFTU is equally adamant that Eskom will never be rescued by the ‘solution’ floated by Public Enterprises minister Pravin Gordhan, which is to ‘unbundle’ – or split Eskom into three parts: power generation, transmission and distribution business units – with the possible involvement of the private sector in one or more of these units.
Privatisation or unbundling, will make Eskom’s crisis even worse. The underlying cause of this crisis is not that it is in public ownership but because it has been run as if it was already a private company, with profit maximisation its sole objective.
This problem was exacerbated by the massive looting of its resources by corrupt private companies and Eskom executives, which Eskom Chair Jabu Mabuza has said caused R19.6 billion in irregular expenditure since 2012.
SAFTU stands in solidarity with our affiliate NUMSA, and supports their following demands on Eskom:
1. Eskom must dismiss all corrupt ringleaders who continue to run amok at Medupi and Kusile power stations immediately. The cost overruns of the build project are evidence that massive corruption took place. Contracts were inflated for the benefit of suppliers linked to Eskom executives. They must also recover every cent which was misspent, either through mismanagement or corruption by current and former Eskom executives.
2. They must cancel the IPP project which is proof that the plan is to sabotage Eskom to enable privatisation. Eskom buys a unit of electricity from the renewable energy IPPs at R2,12, when it can produce it at less than 50 cents and then sells it to the public at 89 cents. What kind of cock-eyed business strategy is that? It is designed to fail, and this is why Eskom is permanently broke!
3. The board of Eskom should be scrapped and replaced with people who actually care about Eskom’s future and in its survival. The board should be made up of representatives from unions, community organizations, business and the state. For more than two decades the ANC-led government has been appointing its corrupt cronies to the board in order to facilitate looting of the SOE. We are suffering because SOE’s are being used as the personal piggy bank of the politically connected ANC elite, and are not operating in the interests of the working class majority.
4. All plans to privatise Eskom must be scrapped. We must keep all our SOEs, especially Eskom in the hands of the state. Electricity is already very costly for the working class majority, privatization will worsen this, thus entrenching inequality. It will also result in huge job losses.
5. Eskom must halt all retrenchment processes. No one can be retrenched without unions being consulted.
Eskom must be seen as a vital public service public, not a source of loot and profits. It must be run to by the people in the interests of the people and must provide efficient, safe and affordable power to the people of South Africa. Nersa must say NO to this 15% annual 3-year tariff increase.