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Electricity price hike could cause massive job losses

Publish date: 22 November 2017
Issue Number: 214
Diary: Legalbrief Workplace
Category: Corruption

The proposed 19.9% electricity hike by Eskom will result in job losses in the steel and engineering sector, warned an economist for the Steel and Engineering Industries Federation of Southern Africa (Seifsa). Mining Weekly quotes Seifsa CEO Kaizer Nyatsumba as saying: ‘It will worsen the plight of the ailing metals and engineering sector.’ The sector has already lost a total of 25 000 jobs in the three years between July 2014 and June this year, Nyatsumba said. Seifsa chief economist Dr Michael Ade said a high electricity tariff increase will stifle output in the metals and engineering sector. He said the metals and engineering sector’s share in manufacturing output is nearly 30%. It contributes approximately 3.6% of the gross domestic product to the SA economy. If the tariff increase application goes through, it will be a critical setback for the sector's productivity, said Ade.

Full Fin24 report

The Chamber of Mines (CoM) has opposed Eskom’s proposed tariff increase application, stating that the increase would send SA into a vicious downward spiral of higher electricity prices, lower growth and lower electricity consumption. Mining Weekly reports that presenting at the National Energy Regulator of South Africa’s (Nersa’s) hearings, in Gauteng, CoM chief economist Henk Langenhoven said Eskom would be a key contributor to a no-growth economy and credit downgrades – and the mining industry would take a significant knock. A 20% hike in tariffs could result in a decline in economic growth and the cumulative opportunity cost in job losses of more than 600 000. ‘This would result in the government debt-to-GDP ratio rising from just over 50% now to 75% by 2021 and over 104% by 2030 with all its consequences,’ he added. The CoM suggested Nersa pursue ‘the least damaging solution’ to deal with Eskom’s impending cash crunch.

Full Mining Weekly report

Meanwhile, Eskom does have enough cash to pay wages and keep operations going for a few months and does not plan to retrench any workers despite a liquidity crunch. Eyewitness News reports that this is according to Eskom spokesperson Khulu Phasiwe who said: ‘The finance division has indicated there isn’t any hindrance to our ability to make those payments (wages).’ Phasiwe said the firm’s sales growth had been muted while its operating cost was very high and its tariff for the current financial year was low. ‘We are not insolvent, but we are projecting that if we continue along this trajectory we might be in trouble,’ Phasiwe is quoted in the report as saying. ‘We as the company we need to sort ourselves out and get our house in order so that when we go out to the market to raise money these things do not become a hindrance,’ said Phasiwe.

Full EWN report

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