“LATEST ENERGY PRICE HIKES, ANOTHER HUGE BLOW FOR SA’S POOREST” – SAFCEI

MEDIA RELEASE

25 JUNE 2021

“LATEST ENERGY PRICE HIKES, ANOTHER HUGE BLOW FOR SA’S POOREST” – SAFCEI

Next week, in the heart of winter, South Africans will face big increases in electricity, when Eskom’s latest price hike will take effect on 1 July 2021. The Southern African Faith Communities’ Environment Institute (SAFCEI) joins other social justice organisations in condemning the upcoming increases to electricity and other municipal services costs that were announced in late-May.

SAFCEI’s Executive Director Francesca de Gasparis says that once again the tariff hikes will impact residents in low-income communities the hardest with the added difficulties of the third wave of the Covid-19 pandemic.

As from 1 July 2021, Cape Town residents will be expected to pay 13.48% more for electricity, while Johannesburg and Durban residents will be paying 14.59% from their municipalities. On the other hand, those consumers who are directly supplied by Eskom, were already hit with a 15% tariff increase as of 1 April - a massive hike, and the result of Eskom succeeding in contesting a price increase for this year from the National Energy Regulator (NERSA) of 15.06 %.

“These high price hikes are set to keep rising well above inflation year on year as Eskom faces serious financial issues. And what is even more frustrating, is that South Africans are also having to spend even more money to buy alternative power sources during load shedding. As a result, many families now find themselves unable to sustain electricity costs for a month and are making difficult choices between food, toiletries, and travel so they can have lights and warmth. All these point to major health and safety risks, as communities resort to hazardous illegal electricity connections. However, that’s not all. Municipal tariff increases – for water, sanitation, waste removal and rates also come into effect on 1 July. Worryingly it has also been reported that food inflation in April 2021 was up 6.30% since April 2020,” says de Gasparis.

The Public Affairs Research Institute’s (PARI) working paper, Broken Promises (released in April 2021) exposes the failure of the national programme of a free basic energy provision. Many of those most in need in municipalities across the country have never received the 50kWhs committed to households in need per month.

According to research commissioned by SAFCEI, local government's service provision funding model is flawed and must be reviewed, since it does not adequately account for the rapidly increasing costs to provide services nor the growing need, resulting from urbanisation. Municipal debt is rising, while more households and businesses battle to pay for the full cost of services. Yet, municipalities are still obliged to provide subsidised essential services and infrastructure to qualifying low-income households/citizens, which includes a free basic energy grant. ESKOM's excessive tariff hikes therefore creates a potential financial tipping-point for municipalities, who are now increasingly unable to pass the full costs on to their citizens.

The 1998 White Paper on Local Government assumed that municipalities could raise 90% of the revenue they needed to provide an adequate level of service to their residents. As a result, municipalities receive a fraction of the revenue they need from the National Treasury.  With the high costs of providing services, on top of the large number of citizens needing subsidised services, what may have been possible in 1998, no longer applies. For example, in 2018/19 in Cape Town, 31% of metered households were on the subsidized Lifeline electricity tariff, and most would also qualify for free water and refuse collection. The economic devastation of Covid has increased this need.

“The tariff increases will only worsen the situation. More and more South Africans are unable to afford what should be basic rights, that is to have access to affordable energy and other essential amenities and services such as clean water and sanitation. It is an indictment against government energy planning that families have to miss meals in order to turn on the taps and keep the lights on,” says de Gasparis.

Kim Kruyshaar Owner of Green Audits Into Action (GAIA) – who conducted research to assess the impact of the electricity price hike on poor urban and peri-urban communities in Cape Town, on behalf of SAFCEI – adds, “The solution for cheaper, cleaner electricity generation is a national reprioritising of energy as an essential service and a wider view of how to provide appropriate energy. This should include the decentralisation of energy supply and a move away from fossil fuels together with a bigger uptake of cleaner and renewable energy sources. With over 40% of households in many urban areas unable to afford the full cost of supply, a new subsidy model from central government is required as a matter of urgency.”

The models that determine Eskom’s tariffs such as the Multi-Year Price Determination (MYPD) and Regulatory Clearing Account (RCA) also must be reviewed. SAFCEI amongst other civil society and industry bodies have been calling for this for years.

“Since 2008, the price of electricity has gone up by 300%. These excessive electricity increases are, in part, the result of poor management and corruption – a focal point of the State Capture Commission of Enquiry – that have resulted in huge delays and cost overruns of new coal generation projects. These costs are having disastrous implications for the government’s promise of grid-tied electricity for all. The net result of all the above - on top of the problems at the aging  Koeberg Nuclear Power Station - is that the majority of the Cape’s residents (and others around the country) are facing a bleak winter. We fear that many will go hungry and cold in the coming months,” adds de Gasparis.

“We are, therefore, pleased that President Ramaphosa has given his minister of Minerals and Energy a clear brief to pro-actively increase support for renewable energy capacity. SAFCEI has been calling for increasing RE generation for some time now. This move is necessary for a just transition that must happen if we hope to avert a climate catastrophe which will be far worse than the current covid crisis. And, it will be crucial that government puts proper mechanisms in place to ensure that these developments are equitable, inclusive and socially-owned,” concludes de Gasparis.

ENDS

Issued by Maria Welcome. For media queries, contact:

Maria on maria.welcome.comms@gmail.com/082-936-9199

Natasha on natasha.adonis.comms@gmail.com/0797-999-654

Note to Editor:

https://tradingeconomics.com/south-africa/indicators