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OCT 30 2013

Electricity tariff rises have hurt economy, says energy minister

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 30th OCT 2013

THE rises in electricity tariffs have had an adverse effect on the growth of the economy, contributed to inflation rises, may have made some marginal industries economically unviable and affected service delivery at municipalities, says Energy Minister Ben Martins.

Mr Martins on Monday replied to a number of Parliamentary questions from members of the National Council of Provinces where he detailed the effect of the electricity tariff hikes on the economy.

In March the National Electricity Regulator of South Africa granted national power utility Eskom an 8% per annum tariff increase for the next five years, effectively half of what was asked for.

South Africa's electricity prices had rocketed by more than 170% over the past five years, while administered prices in other Brics (Brazil, Russia, India, China, South Africa) countries had decreased by more than 36% in the past decade.

The price increases in South Africa contributed to the closure of 440,000 small businesses in the five years to 2011.

In one of his replies, Mr Martins said the steep tariff increases was not peculiar to this country, but that in contrast to many other developing countries, South Africa had embarked on a large build programme that was mostly funded through tariffs.

"Other countries, particularly in Africa, do not have the same scale of capital expansion and therefore their tariff increases are not as steep," he said.

Mr Martins said that the steepness of the tariff increases was also a function of the past as tariffs were kept very low for about 15 years.

"As we begin the capital expansion (Medupi, Kusile), it is inevitable that tariffs would have to increase. Nonetheless, we don't believe they have to increase as fast as that," he said.

Mr Martins pointed to global trends saying that electricity tariffs were much higher in developed countries due top electricity infrastructure investments that had either been made or were being made.

"In other words, globally the trend is to avoid concentrating capital investment over a shorter period but rather to roll it out constantly over a longer period to avoid steep increases in tariffs," he said.

In other replies to questions on the electricity supply situation, Mr Martins pointed to the solar water heating programme and the use of the Approach to Asset Distribution Management to help municipalities address the issue in the decline of service delivery.

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