Ever increasing electricity tariffs leaves a sour taste in the mouths and an empty wallet in the pockets of consumers. With a further reported increase coming, a lot of businesses especially small to medium-sized businesses will feel the squeeze..
The ramifications of increasing electricity is felt everywhere from Households to energy intensive big corporations. The economy suffers due to inflated prices of even the most basic foods. The responsibility to increase tariffs must not be taken lightly. In the last two years electricity tariffs have increased substantially. There have been warning signs for some time, but the lack of action has made it difficult to commit to expensive projects that are energy intensive, because the cost of power is too much and there is a need for reliability of supply.
According to Mike Schussler: South Africa’s economy would have been 10 percent bigger than it was in 2008 had it not been for power curbs to businesses and Eskom’s inability to commit to supplying electricity for new projects.” In the last 20 years, supply was extended to more than 7 million people which left Eskom to narrowly exceed the demand needed.
During load shedding, Eskom cuts power to residents and businesses alike for a couple of hours at a time. This is especially bad for a growing economies, that relies in energy-intensive industries such as deep mining and smelting projects like chrome and aluminium.
Massive companies in SA such as BHP Billiton and Sibanye needs to cut usage by at least 10% during blackouts, as required by Eskom. Even after all of these reductions in demand, South Africa’s reserves was only about 5.4%, less than third of the international norms.
Further quoting Mike Schussler: “Gross domestic product is forecast to grow 1.4 percent this year, the slowest since a 2009 recession, after labour strikes and power cuts curbed output. While blackouts have shaved about 0.3 percentage point off GDP growth this year, or about $940 million, the real cost is a loss of the economy’s “productive potential,” he continues: “People are not investing in new projects, mines can’t go deeper because they can’t get power and even state-owned enterprises can’t invest in certain areas.”
Schussler further said that the economy could have added a further 500 000 jobs, if there wasn’t load shedding. South Africa has a high unemployment rate almost 25%, it might be even higher among younger black South Africans
Eskom produces roughly about 95% of South Africa power and 45% of the electricity on the African continent. Eskom is battling with upgrading the aging power plants and infrastructure of the country, which is needed for a growing middle class. The power utility is also crippled by a government that wants to keep the prices low, which left Eskom with a R225 billion shortfall. The credit rating of Eskom has also been lowered substantially.
As previously mentioned, a lot of jobs will be lossed and is already lost due to load shedding, coupled with slower economic growth and a limping GDP growth.
Christo van der Rheede, CEO of AHi talking to News 24 said the following: “The tariff increases by municipalities will further add to the pressure on the small business sector, which is already struggling,” AHi also appealed to its members to join the public hearings held by NERSA to oppose the increases as it will be detrimental to businesses within South Africa.
Eskom claims that the increases are necessary to cover costs incurred by the high operational cost of the open cycle gas turbines and to pay independent producers. Van der Rheede further said, that these claims from Eskom should be investigated to ensure the veracity of these statements, he continues: “South Africa’s economy is already under great pressure and excessive tariff increases will deter investments and could lead to large scale closure of businesses and unemployment.” Debt Rescue CEO Neil Roets had similar sentiments.
In short, the approval of these increases will be disastrous for the consumer and would facilitate millions of people plunged into debt followed by bankruptcy. Private individuals and businesses alike will feel the pinch.
What can be done?
Unless something can be done by the Eskom management, companies will continue to suffer.
Steps that can be taken to lower energy bills is as follows:
- Install an online energy meter to measure and manage your energy consumption
- Make use of energy management services to optimise your business’ electricity usage.
- Do an analysis of your current tariff structure and look for opportunities to lower energy costs by using your electricity according to your current tariffs lower rate requirement.
- Compare available tariffs to ensure that you are on the cheapest available electricity tariff.
- Make use of bill verification software, to avoid bills that are estimated or have er data capturing- or metering errors.
- Power factor surveys to reduce costs if you are on a demand charge tariff.
This can potentially be a game changer for your company by using energy efficiently and secure profitability even under these problematic circumstances we find ourselves in.