The average four-person South African household should pay R290 a month for electricity, yet Eskom is charging them roughly R1,200, says a lobby group.
Now Eskom is seeking a 20% tariff increase from the National Energy Regulator of South Africa (Nersa).
Energy analysts have described Nersa, which starts its public hearings into the proposed tariff increase in Pretoria today, as the only thing preventing disaster.
Presentations by the Organisation Undoing Tax Abuse to parliament’s public enterprises portfolio committee this week reveal the power utility should be relying on its capital expenditure budget and the government and not on ordinary South Africans to float it.
Finance Minister Malusi Gigaba this month said the government was considering granting Eskom a favourable loan or possible bailout.
StatsSA yesterday released its findings of Capital Expenditure by the Public Sector 2016 report, which showed that capital expenditure by public sector institutions rose to R284-billion from R265-billion.
The report shows that capital expenditure by state institutions has increased by R1.2-trillion over the past five years. Eskom accounted for R73-billion, with the new Medupi, Kusile and Ingula power stations accounting for R70-billion.
Outa’s energy specialist Ted Blom said they revealed to parliament Eskom had a qualified audit of R3-billion in irregular expenditure without supporting documents.
“Explanations are needed as to how the R3-billion was processed without the documentation. Either there is a magic password which allowed this or there is an old chequebook lying around. Either way Eskom’s chief financial officer, Anoj Singh, must explain.”
Blom described the electricity tariffs the average four-person household was paying as “daylight robbery. There are three cost drivers to the power utility. They include the financing costs of money borrowed, their power plants and the operations.”
Only Eskom’s operations were subject to inflation, so increases should be a third of inflation, as two-thirds of costs were fixed.
He said on the assumption Eskom was efficient in 2005, and the cost of electricity for a four-person home was R160, the cost now for electricity, based on an annual escalation of a third of CPI, would be R290.
Blom said compounding Eskom’s financial problems was the building of Medupi and Kusile power stations.
Blom said Eskom recently announced that they need to borrow R325-billion over the next five years to finish off the two stations, 10 times higher than initial estimates.
He said Nersa should, and could, dramatically reduce the electricity tariff.
Nersa spokesman Charles Hlebela would only say that Eskom’s application would be considered in terms of the law.
Eskom spokesman Khulu Phasiwe said they would respond to allegations in parliament and not through the media.
By Graeme Hosken for TimesLive
South African consumers have hit hard times over the past few years as a creeping GDP growth, high unemployment and many political shocks continued to weigh on the economy.
In June, GDP data from Stats SA showed that South Africa has officially entered into a recession, with economists predicting tough times ahead for consumers, as more ratings downgrades are in the pipeline, which will ultimately put further pressure on the pocket.
One of the key components of South Africa’s slide into recession was a cut in consumer spending, in everything from recreation, clothing and transport, to even basic needs categories like food.
And South Africa’s biggest food retailers are feeling the pinch.
In April, Pick n Pay missed expectations for its full year earnings citing strained consumer spending as shoppers sought out cheaper options – which appeared to drive them to Shoprite’s doors, who reported a 14% growth in turnover in its latest financial year.
Woolworths, which has consistently positioned itself as a ‘premium’ food store, has seemed to weather the storm, with its latest results for FY2016 showing a 24% growth in profit from its food segment – which makes up 37% of the group’s total turnover.
A weakening economy and drought conditions hit South African food prices hard in 2016, with food inflation hitting close to 12% throughout the year. With a record yield from crops expected in 2017, some relief is on the cards – but the recession and other expected economic woes are likely to keep the pressure on consumers.
In the latest assessment of prices across South African retailers, we found that there has not been much a shift among South Africa’s food retailers.
When shopping for the BusinessTech basket of goods, Woolworths still checks out at the highest price – though it is apparent that, with the exception of Shoprite, competitors have struggled to keep prices low.
The BusinessTech Basket of Goods
For our basket, we look at some essential and non-essential food products. The basket contains 12 items, with store-brands priced for each item where available. The table below shows the pricing:
Prices were sourced in-store from stores around Centurion and cross-checked online, where applicable.Promotional prices, where marked, were not taken into account. Woolworths self-raising flour prices were determined on a per kg basis. In-store prices are subject to change depending on individual regions and promotions.
Prices have increased significantly in some cases, compared to the mid-2015 review. This is most notable in sugar and maize, which were impacted by drought conditions in the country during the interim period.
The most striking difference between the 2015 and 2017 reviews is that Pick n Pay, which was ranked as the cheapest basket in 2015, is now extremely close to being the second-most expensive, a few rands under Spar.
Checkers, which has positioned itself as the more affordable option, has lived up to that reputation, with many of its prices actually decreasing between 2015 and 2017.
South African packaging and paper company Mondi said on Thursday underlying operating profit for the first quarter of 2017 was down 6% due to lower selling prices and inflationary cost pressures.
Underlying operating profit fell to 252-million euros ($274-million) in the three months through March from 269 million euros a year ago, Mondi, which is also listed in London said in a statement.
The figure was up 12% on the fourth quarter last year due to higher sales volumes and prices.
“Strong sales volume growth was more than offset by a significantly lower forestry fair value gain, inflationary cost pressures and lower average selling prices,” the company said.
The packaging paper division was impacted by lower selling prices for containerboard, while significantly lower gains on the value of its forestry assets, lower average export selling prices for hardwood pulp and white top kraftliner products, and a stronger rand impacted the South Africa division.
“As previously advised, we are experiencing some inflationary cost pressures across the Group and the forestry fair value gain is expected to be lower than in 2016,” the company said.
*($1 = 0.9195 euros).
By Nqobile Dludla for www.moneyweb.co.za