The Steel and Engineering Industries Federation of Southern Africa (Seifsa) has warned of immense job losses should Eskom gain the proposed 19.9% electricity hike it has requested. According to Seifsa chief economist Dr Michael Ade, a high electricity tariff increase will stifle output in the metals and engineering sector, and will be a critical setback for the sector's productivity.

The metals and engineering sector’s share in manufacturing output is nearly 30%, contributing approximately 3.6% South Africa’s GDP. The sector provided employment to approximately 480 000 people last year.

Eskom hike rejected by industrySeifsa CEO Kaizer Nyatsumba points out that has already lost a total of 25 000 jobs in the three years between July 2014 and June this year. “Job losses at that scale move SA away from the goals and objectives of the National Development Plan (NDP), which proposes the creation of 11m jobs by 2030 through, among others, the promotion of employment in labour-absorbing industries,” he adds.

Ade says that an inevitable consequence of the proposed 19.9% hike by Eskom will be more job losses and that if the National Energy Regulator of South Africa (Nersa) felt that an increase for Eskom is necessary, then it should be implemented at a much lower percentage than proposed.

Henk Langenhoven, chief economist at the Chamber of Mines, adds that Nersa needs to find a short-term solution to help Eskom to get out of its current financial crisis. However, this should be conditional on an immediate structural adjustment programme.

“By the end of the first quarter of 2017, the mining industry was making an average net pre-tax loss of about R18bn. After a 19.9% increase in Eskom tariffs, 66% of gold and platinum mines would become unsustainable,” he says.

“A 19.9% hike in tariffs and a government bail-out for Eskom would be catastrophic for the economy. The tariff hike would curtail economic growth by 17% and cost 600 000 potential jobs. A government bail-out would raise the ratio of government debt to GDP to 75% by 2021.”

He suggests that structural changes at Eskom are needed, including accelerating decommissioning of old power stations, bringing operational costs (mainly headcount) in line with international standards, a complete evaluation of the regulatory asset base and accelerated completion of more efficient power stations. The regulatory clearing account and multiyear price determination regulatory processes also needed to be reviewed, he said at Nersa’s three-day public hearings in Gauteng.

Image credit: https://www.linkedin.com/in/kaizer-m-nyatsumba-mba-hull-cert-dir-iodsa-6583a631


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