COSATU response to report of Eskom's revised tariff application
The Congress of South African Trade Unions has noted reports that Eskom has revised its tariff application from 45% a year for the next three years to 35%. COSATU will study the revised application once published and respond accordingly.
The 35% tariff increase would still be too high. Using the average end-user residential electricity price of 80c per kWh, it means households would pay R1.08, R1.50 and R1.97 per kWh in 2010, 2011 and 2012 respectively in nominal terms. This translates to a whopping 146% increase over the Multi Year Price Determination period.
This would be the tip of the iceberg, as consumers are likely to face even steeper tariffs as the private sector gets more involved in the electricity industry. The crisis in the sector, which is as a result of failed attempts in the late 1990s to privatise Eskom, is now being use to justify privatisation. It is reported that Eskom will now sell 30% of its stake in the Kusile power station to private interests. The building of Kusile will now be delayed to give Eskom a change get this private equity.
Instead of building more coal-fired power stations there is an urgent need to upscale investment in renewable sources of energy. Empirical evidence shows that while it is cheaper to produce electricity from coal now, it is going to be costly in the medium to long term. The inverse is true in relation to the renewable sources of energy; they will become relatively expensive initially but cheaper in the long term. Upscaling investment in renewable sources of energy will not only address the challenge of climate change but will create the all-important jobs in the economy.
While the economy has shown some signs of recovery, the country is not yet out of the economic crisis, especially given the rate at which almost a million jobs have been shed in the first three quarters of 2009.
As part of measures to address the economic challenges facing the country due to the global economic melt-down, the social partners have agreed, in the Framework for SA's Response to the Crisis, that electricity prices must be moderated. This is what the framework said:
"The parties recognise the need for adequate infrastructure to lay the basis for growth and development. At the same time, the parties agree that excessive increases in administered prices may exacerbate the negative impacts of the current situation and agree that increases in administered prices should carefully balance these different considerations".
The framework also recognised the importance of investing in green technologies to attain the objectives stated above already:
"The parties recognise the opportunities in industries that combat the negative effects of climate change and believe that South Africa should develop strong capacity in these green technologies and industries. Accordingly, it is agreed to develop incentives for investment in a programme to create large numbers of green jobs, namely employment in industries and facilities that are designed to mitigate the effects of climate change. Government will be asked to develop a proposal for consideration by the parties. This proposal will, where appropriate, build on current initiatives of greening existing manufacturing and service activities".
COSATU expected Eskom to take this framework into account when revising its application. We want to reiterate our call for government to foot the bill for the completion of the Medupi power station. Part of the R787bn budgeted for infrastructure must be used to help Eskom complete its construction.
The federation has also called for a special, once-off tax on corporations for this purpose. Government can also increase taxes marginally while maintaining the tax-free income threshold. This would ensure that majority of low-income workers and the poor do not bear the excess burden of the tax.
Lastly, we call for an urgent revival of the campaign for the efficient use of electricity. Any success on this front will make the building of additional coal-fired power stations unnecessary and relieve the working people and the poor from high electricity tariffs.
Statement issued by Patrick Craven, COSATU national spokesperson, December 2 2009
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