Eskom’s application to National Energy Regulator of South Africa (Nersa) to hike electricity tariffs by 66% over three years is a reminder that Eskom is a liability to South Africans.

It is troubling that at a time when the cost of living is very high, Eskom sees it appropriate to increase electricity prices at an excessive rate. This is after years of subjecting South Africans to blackouts, with businesses shutdown and jobs destroyed.

Eskom is doing what it must do in pure economic terms. The fact is somebody has to pay for the cost of producing electricity supplied by Eskom. In other words, somebody has to pay for the mess that politicians caused at Eskom over the years and it’s going to be you and I.

South Africans disapprove of these proposed tariff increases. The DA has taken to the streets to protest against the increase in tariffs.

What has harmed South Africa is that Eskom does not operate in a competitive environment. Eskom has been a monopoly for a very long time in the energy market. Electricity customers had no alternatives to Eskom. Monopolies abuse the market they operate in. That’s a well-known documented fact.

Since 2008, Eskom has increased tariffs at a rate way above inflation, as shown in the graph below by Businesstech. Coupled with the blackouts we have endured over the past decade and a half, it’s clear that the cost Eskom has imposed on South Africa over the years is colossal.

 

President Cyril Ramaphosa liberalising the energy sector with the Electricity Regulation Amendment Act that allows for increased competition in the energy sector was a step in the right direction. This was, I believe, a major achievement by President Ramaphosa during his first term at the Union Buildings.

Robust competition in the energy sector will address challenges of energy supply. According to Konrad Adenauer Foundation, “fully functional competition is the engine that drives sustained economic activity.” We need functional competition in South Africa’s energy sector.

The advantage of a competitive energy sector is that Eskom will lose customers if it continues with its inflated electricity price hikes and other activities that customers don’t like.

Higher electricity tariffs are not good in an economy that is already struggling to grow at more than 1%.

Monopolies shouldn't exist in any sector, especially monopolies that are financed by the government.

In the long term, there will be many suppliers of electricity, as chief economist at STANLIB, Kevin Lings, has said. This will boost growth in the country and encourage job creation.

There is an obsession with renewable energies and coal. The obsession is unnecessary, in my view. We do not have to be obsessed with either of these energy sources. All forms of energy supply should be allowed to flourish in South Africa. Currently, more than 80% of South Africa's energy source is coal.

Should we diversify our energy sources? Yes, we should. However, we must ensure that lights are kept on in the process of diversifying our energy sources, and that the transition to renewable energy is smooth with minimal negative impact on people’s livelihoods.

South Africa’s growth should not be repressed by lack of stable energy supply.

There are many movements against fossil fuels around the world. Greta Thunberg, a Swedish environmental activist, is one of the leaders of these movements.

These anti-fossil fuel movements fail to understand that developing nations face enormous challenges, with abject poverty and very weak infrastructure. Many of these countries use coal as a source of energy, since they can easily access it.

Eskom has been used as a tool to advance renewable energies, and there is nothing wrong with that. So long we ensure that diversified, stable energy supply is pursued in South Africa.

A new era has begun in South Africa's energy market, and it looks like Eskom will be the loser over the long term, as competition in the energy market intensifies. Eskom’s excessive tariffs hike are disgraceful and will be damaging to South Africa’s poor.

Phumlani M. Majozi is author of a new book “Lessons from Past Heroes” and a political economist. He’s the host of The Phumlani Majozi Show on YouTube. Subscribe to his show here: Phumlani M. Majozi - YouTube.