President Cyril Ramaphosa says the recent announcement of an 18,65% increase in electricity tariffs comes at an extremely difficult time for citizens and businesses alike, who are already contending with the high costs of fuel, food, and other essentials. He called on the Eskom board to consider measures that could help to mitigate the impact of the increase by changing the implementation date.
The new tariff was approved by the National Energy Regulator of South Africa (NERSA) following a prescribed process, which includes wide-ranging public consultation. It is important that the independence of NERSA is affirmed, and that due legal process is followed in setting tariffs, the President says.
Tariffs that reflect the cost of producing electricity are necessary for Eskom’s financial sustainability, to enable the utility to service its debt, and to undertake the critical maintenance needed to end load shedding. Yet, there is little doubt that increasing the price of electricity now, at this challenging time, will add to the difficulties South Africans are already facing, he added.
Rising food and energy prices are fuelling a cost of living crisis around the world, and the poor are always hit the hardest. In South Africa, food prices have increased on average by 12% over the past year.
This is the challenge: To ensure that Eskom has the resources it needs to resolve the electricity crisis while protecting South Africans from the effects of higher prices.
To meet this challenge, all stakeholders, including government, Eskom, business, labour and communities, need to work together to achieve a very difficult balance. At all times, we must be guided by the needs and interests of the public, especially the poor. We should be wary of short-term solutions that we will regret in years to come.
The government will continue to implement policies and measures to mitigate the hardship being experienced by vulnerable citizens. Since the earliest days of democracy we have implemented a policy of free water and electricity for indigent households. The free basic electricity allowance, if implemented properly by municipalities, should shield the poorest households from the effect of the tariff increase. Government remains totally committed to this policy, Ramaphosa says.
Other programmes to expand the social wage include the provision of free primary healthcare, exempting learners from poor families from paying school fees, a school nutrition programme that supports over nine million learners countrywide, and the provision of free tertiary education for students from poor families. The zero-rating of basic food products for VAT helps to decrease their cost for the poor.
The national minimum wage, which was introduced in 2019, has improved the remuneration of many workers, especially farmworkers, domestic workers and other vulnerable workers.
Another means by which the state is supporting society’s most vulnerable from excessive price increases is through competition policy. During the pandemic, the Competition Commission used its powers to bring down the prices of Covid-19 tests and suppliers found guilty of overcharging for face masks were fined.
The Competition Commission monitors essential food prices and recently found that consumers were facing ‘opportunistic increases’ in the prices of sunflower oil, a basic cooking staple for millions of households.
All of these measures provide an important ‘social wage’ that has helped to cushion poor households from the worst effects of rising prices. Government is considering additional mechanisms to address the rising cost of electricity. These include measures such as helping households and small businesses install solar power and energy-saving devices, supporting households with rechargeable lights, and working with learners to catch up where load shedding interrupts lessons. We should be able to provide further information on these and other initiatives in the coming weeks.
Part of everyone working together to overcome the energy crisis is the need for everyone to pay for the electricity they use. We can only improve and expand the provision of electricity and other basic services if government and municipalities in particular have the means to do so. Non-payment and illegal connections make electricity provision more expensive and less reliable.
The global cost of living crisis has been described as a once-in-a-generation economic shock, and it is being worsened by global events that are beyond our control.
The President says the government will continue to expand the social wage, and accelerate efforts to restore a reliable and secure electricity supply. Government will continue to pursue closer cooperation with all social partners and public entities to find sustainable ways to shield every South African household from the worst effects of rising energy and other costs.