The scale of the crisis and the economic threat posed by the electricity supply situation require “an aggressive response like the response to the Covid-19 pandemic”, said the Federation of Steel and Engineering Industries of South Africa (Seifsa).
In a statement issued on Monday, chief operating officer Seifsa Tafadzwa Chibanguza said the federation was “deeply” disappointed by the announcement of an 18.65% increase in electricity tariffs last Thursday by the National Energy Regulator of South Africa (Nersa).
The hike will take place in April.
‘Very unlucky’ time
“While it is recognized that Nersa has a very difficult balancing act to manage, including ensuring the sustainability of the electricity utility, the timing of the increase is unfortunate,” said Chibanguza.
“The increase is given at a time when Eskom is unable to supply enough electricity to customers, a situation that is expected to continue in the future.”
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In addition, Chibanguza said, is the cost of living that South Africans have borne, along with the rising cost of doing business in the country.
Accumulated costs
Because the company has to follow the lights to keep them on when they load, for example a generator that can cost 3-3.5 times more per kilowatt hour – Seifsa says that they will pay more electricity than ‘only’ 18.65% and 12.74% increase Nersa was awarded by Eskom for the financial years 2023/4 and 2024/5, respectively.
It noted that the effect of the tariff increase would be to damage the value chain of the metals and engineering sector, which is mainly composed of energy-intensive upstream industries and energy-poor downstream industries.
The cost of alternative energy solutions for energy-intensive upstream industries is extremely low, due to consumption, leaving the industry “tied to Eskom and subject to punitive cost increases”.
It added that while downstream industries can provide alternative energy solutions, the costs of implementing these alternatives are also high.
Chibanguza said the declining attractiveness of investment opportunities in the country, as a result of the energy crisis, was also a concern.
As another long-term implication for local businesses.
“Companies are sacrificing long-term capital that they can afford to expand their operations and expending these scarce resources to achieve immediate survival,” Chibanguza said.
“The long-term implications will be a continued structural decline in the performance of the metals and engineering sector, which has been tracking at a rate of 1.6% on a compound annual basis since 2008.”
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He said that the workforce in the sector, especially women and youth, has contracted at the same pace this time.
Chibanguza said only a “clear, honest and dogmatic focus” on structural reforms in the energy sector will move the country out of the current electricity crisis.
“Reliable, consistent and cost-efficient electricity supply is not only in the interest of the private sector but of all South Africans. Therefore, private sector involvement in electricity supply must be accelerated without restriction and delay.
This article originally appeared on Moneyweb and is republished with permission. Read the original article here.