South Africa: Electricity pricing paralysing the poor

by T Chehore, Frost & Sullivan Africa


Published in the October 2014 issue of Electricity+Control (pages 50 – 52)

Enquiries: Samantha James. Tel. 021 680 3574 or email Samantha.James@Frost.com

 

Download the full article on South Africa: Electricity pricing paralysing the poor in PDF format.


The electricity sector in South Africa has been in a state of disruption over the last few years. The country’s power utility company, Eskom, has been under scrutiny for several reasons. Most of these reasons relate to the rolling blackouts, load-shedding episodes of 2007/8 and high levels of inefficiency. Constant tariff increases under the multi-year price determination (MYPD) programme is another major source of discontent towards the utility. The tariff increases have grown from a modest rate of 5,1 % in 2006/7 to a peak of 31,3 % in 2009/10.

These tariff increases were generally at rates above the Consumer Price Index (CPI) and as such, elicited harsh backlash from the general public. Eskom has insisted that these tariff increases are not only justified, but that they are imperative to curb the current power crisis and to prevent the catastrophe experienced in 2007/8. Even if their claim is true, it begs the question: What impact has the utility’s tariff structures and tariff increases had on typical South African households – particularly those falling into the lower portions of the income distribution? Is electricity pricing paralysing the poor?

 

Take note

  • The massive tariff hikes proposed by Eskom are suggested to be an attempt by the utility to catch up with global best practices.
  • Part of Eskom’s justification for price increases has rested on the claim that historically South Africa has had some of the lowest tariffs in the world.
  • Despite the motivation for their necessity, the tariff hikes will hurt the poor.