Electricity price hike will hit consumers hard
‘For the first time, the full implication of state capture has been revealed in all its horror’
THE 9.41 PERCENT increase in the price of electricity granted to Eskom by the National Energy Regulator of South Africa (Nersa) is going to hit both consumers and the economy like a ton of bricks.
Coming on top of a 4.41 percent hike already approved, this could be the straw that breaks the proverbial camel’s back, said Efficient Group chief economist Dawie Roodt.
“The bitter irony is that this increase, together with the other increases approved for the next three years, is not going to be anywhere near enough to save an Eskom that is broken and bankrupt,” Roodt said.
He said the only solution was for the government to assume the R420 billion debt that Eskom owes, fire 30 000 employees, reduce salaries across the board and start from scratch.
“Eskom cannot be bailed out by consumers. The reality is that electricity consumption has dropped considerably over the years as more consumers switch to solar and other alternatives, and will never return to their previous levels of consumption.”
If the government assumed Eskom’s debt, it would represent close on 15 percent of its total debt burden and ratings agencies have already signalled that this would lead to further downgrades. “I think for the first time, the full implication of state capture and the ANC’s gross mismanagement of the economy has been revealed in all its horror,” Roodt said.
Neil Roets, the chief executive of Debt Rescue, one of South Africa’s largest debt counselling companies, said consumers were probably now in a worse situation since the debt crisis of 2008.
“There’s talk among some economists that the economy could shed as many as 150 000 jobs in the mining and industrial sector if Nersa goes ahead with this foolishness. One of the basic fundamentals of a healthy economy is a reliable and reasonably priced electricity supply, and we are now falling short on both requirements.
“The mere fact that growing numbers of consumers are using credit cards to by basic commodities such as food tells you there is something seriously wrong with the economy.
“An increase of almost 10 percent in electricity tariffs granted by Nersa, on top of the 4.41 percent already granted, is going to be a catastrophe, not to mention the fact that we have major fuel price increases waiting for us down the road.”
Coming on top of the economy’s paltry growth rate of 0.8 percent with massive job cuts down the line as a result of further electricity price rises when Eskom attempts to implement the so-called “claw back” of R3.86bn it allegedly lost during the 2017/18 financial year and the acceptance of the fact that it was never going to collect the outstanding R17bn owed to it by municipalities, the situation has deteriorated beyond grim, Roets said.
“Total consumer debt now stands at close to R1.73 trillion (according to the latest figures released by the Reserve Bank), which clearly shows that consumers have not cut back on spending significantly. A recent World Bank index has also shown that South Africa is one of the most indebted countries in the world.”
He said almost half of all consumers were three months or more behind in their payments. The major culprits are credit and store cards, followed closely by unsecured debt.
The only measure of relief for consumers who are in over their heads is the legally binding system of debt review, which allows deeply indebted consumers to repay their debts over a longer period of time in smaller instalments often at a discount.
“Lenders are sometimes willing to take a cut if it means they can avoid having to involve debt collectors or foreclosing on the fixed properties of debtors,” Roets said. | Debt Rescue