South Africa is on edge as Eskom raises its prices

Energy regulator Nersa’s decision to allow power supplier Eskom an almost 19% price increase for energy tariffs in South Africa will send shockwaves across the economy, and consumers and companies will suffer as a result.

This is the warning from many sectors of society, including authorities in the country’s largest cities and analysts who observe that households are already facing a cost-of-living problem, while companies are struggling to deal with a catastrophic electricity situation.

Cape Town Mayor Geordin Hill-Lewis called Eskom’s Nersa-approved 18.65% price rise “unfair and unaffordable,” adding that the city will explore for methods to transition away from Eskom and load shedding in the coming years.

Meanwhile, civil action organisation Outa has labelled the price increase a government failure, claiming that those in authority have not done enough to address the country’s energy issue, resulting in rising costs and longer times of darkness.

According to the activist organisation Rise Mzansi, the impacts of load shedding, a tariff hike more than three times the rate of inflation, and the rest of South Africa’s decaying infrastructure paint a picture of a country on the verge of failure and collapse.

According to Neil Roets, CEO of Debt Rescue, the price increase will have a knock-on impact along vital supply chains, making things far more difficult for businesses and consumers alike.

The price increase comes in the midst of heightened levels of load shedding – presently stage 6 till further notice – putting pressure on consumers, businesses, and every stakeholder along crucial supply chains in South Africa, from manufacturing to retail.

Municipalities will add their own premium to the rise, compounding the problem. The current scenario has been termed as untenable.

“The repercussions of rolling blackouts already pose a serious threat to the lives and livelihoods of people – not least of which pertaining to food security – at a time when over 80% of families are battling to put enough food on the table,” Roets said.

“This looming tariff increase will have severe socio-economic consequences for everyone in the country. There is no clear solution in sight. In fact, Eskom and the government keep repeating the same narrative, alerting the country to a situation that will simply get worse.”

South Africans would not only pay more, but they will also receive less.

According to Roets, the impact of load-shedding on farming should be a primary priority since it makes farming considerably more expensive. Farmers must now endure greater capital outlays for generators and high diesel expenses, on top of already costly inputs like fertiliser and shipping costs.

Farmers’ organisation Agri SA has petitioned the Treasury for discounts on the fuel and diesel they use to produce power, warning that additional production costs caused by outages might jeopardise food security within the next 24 months.

“Farmers have spent literally millions of rand on acquiring generators and solar panels. They also spend millions now on diesel. This is a serious challenge for the agricultural industry,” said Christo van der Rheede, an executive director at Agri SA.

These prices, Roets cautioned, are threatening to drive up inflation, exacerbating the cost-of-living issue.

Load-shedding, according to Roets, adds to growing inflation by interrupting supply chains, raising production costs, and hurting manufacturing prices across industries – and this will be worsened by the new increase in power bills.

“The result of unmitigated power outages will be more food shortages and even higher prices,” he said. “This one-two punch will nullify any hope of inflation reducing because of the lowered fuel prices.”

Other disadvantages include the likelihood of more firms going down, particularly small enterprises that lack the resources to invest in costly alternative energy producers, as well as the ramifications in terms of unemployment when they are forced to lay off workers.

These prices, Roets cautioned, are threatening to drive up inflation, exacerbating the cost-of-living issue.

Load-shedding, according to Roets, adds to growing inflation by interrupting supply chains, raising production costs, and hurting manufacturing prices across industries – and this will be worsened by the new increase in power bills.

“The result of unmitigated power outages will be more food shortages and even higher prices,” he said. “This one-two punch will nullify any hope of inflation reducing because of the lowered fuel prices.”

Other disadvantages include the likelihood of more firms going down, particularly small enterprises that lack the resources to invest in costly alternative energy producers, as well as the ramifications in terms of unemployment when they are forced to lay off workers.

“There can be no economic stability without a stable power supply,” he said.