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Dear Mr Jacob Modise, Chairperson of the National Energy Regulator of South Africa (Nersa),
I write this letter to register the City of Johannesburg's opposition to Eskom's proposed electricity tariff increase currently being considered by Nersa.
As a City with an obligation to act in the best interests of all its residents, we simply cannot accept the proposed increase of 15% over the next three years, due to the profound impact it will have on the livelihoods of our residents, and the businesses operating in our city.
The Reserve Bank's Monetary Policy Committee's January 2019 statement indicates that inflation is expected to average 4.8% in 2019, 5.3% in 2020 and 4.8% in 2021. A price increase of more than 10% above inflation, on the back of a 500% increase over the past eleven years, will increase the cost of living for the city's residents and place a strain on much needed economic development in Johannesburg.
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Johannesburg accounts for 15.2% of South Africa's GDP and 13.1% of the country's employment. The city has not been immune to the sluggish economic growth in South Africa, with its economic growth predicted to be only 3% by 2021. Multiple economic modelling studies have shown that increased electricity prices lead to constricted aggregate output in the economy; a state of affairs that Johannesburg and South Africa plainly cannot afford in our current troublesome economic climate.
Businesses and industry identify the cost of doing business, which includes the cost and supply of electricity, as one of the main barriers to growth. Investors are hesitant to start new ventures in South Africa, due to uncertainty regarding electricity supply and costs. By further increasing electricity rates, meaningful economic growth will be hindered and all South Africans will be worse off.
While we are cognisant of the issues and challenges faced by Eskom, we reject outright that customers are responsible for carrying the costs of management failures at Eskom. We strongly believe that there are other mechanisms that Eskom can apply to improve their financial stability.
The proposed increases cannot be deemed to be reasonable, and should under no circumstances be approved by Nersa. Residents of our city are facing an increased onslaught on their wallets and financial wellbeing through increased fuel prices and the VAT increase. The multi-party government of the City of Johannesburg is committed to being pro-poor. As such, we cannot stand idly by while consumers are punished for years of political meddling, mismanagement and corruption at Eskom.
If the proposed 15% increase is granted, the City of Johannesburg's ability to fulfil its constitutional mandate will also be adversely impacted. We are currently in the process of providing affordable housing units in the inner city, through collaborative efforts with the private sector. Increased electricity costs will increase the cost of construction projects, which will require that developers charge higher rental rates to recover their capital investments. We cannot allow that access to affordable housing be impacted by this tariff increase.
Members of Nersa are required, in terms of section 9(f) of the National Energy Act, 40 of 2004, to act in the public interest in the fulfilment of their duties. The City of Johannesburg is of the opinion that approval of the proposed increase will be a gross dereliction of this legislatively mandated duty to act in the public interest.
I will be leading a delegation of City officials to the public hearings which are to be held in Gauteng later this week to further elaborate on the City's objection to the proposed tariff increase.
- Herman Mashaba is executive mayor of the City of Johannesburg.
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