Oral submission at NERSA Public Hearing: Eskom’s price hike is unfair and unaffordable

17 January 2022 

As Capetonians, our message to Nersa is simple: we simply cannot afford these increases. They are unfair, unaffordable and unjust.

Like the majority of South Africans, many Capetonians are struggling to make ends meet. The pandemic and national lockdown led to the closure of hundreds of businesses in our City and the loss of thousands of jobs. Despite Cape Town having one of the lowest unemployment rates in the country, our residents are faltering under the burden of the rising costs of energy, fuel, food, and basic consumer goods.

I have called on Nersa not to underestimate the harsh economic realities on the ground: our people are struggling to survive amidst increased costs of living, including electricity.

The price of electricity has risen by 307% over the past 13 years, far exceeding inflation. On another method of calculation, over a 15-year period, the average price charged by Eskom for electricity has increased from 19,80c/kWh (in 2007) to 127,63c/kWh (in 2021). This is an increase of 544%. Over and above the 20,5% increase applied for this year, the City has also noted that further increases are planned in future, including an increase of 15,07% in 2023/4 and of 10% in 2024/5.

In the past, the City of Cape Town has absorbed some of the costs of Eskom’s increases, in the interests of safeguarding our residents’ household income and the City’s economy. In the 2020/1 financial year, the City only passed on a 13,48% increase in electricity prices to its customers, as opposed to the 17% increase in prices from Eskom, which was approved by Nersa. This is a significant financial burden for the City. It is simply not financially possible for the City to absorb all, or even a substantial amount, of Eskom’s increases on an ongoing basis. 

All South Africans know that Eskom is in deep financial trouble, and must urgently improve its financial sustainability. However, making struggling consumers — who already pay far too much for electricity — responsible for Eskom’s commercial issues is simply unacceptable. Further, it is not fair for Eskom to pass this burden onto municipalities. Nersa should not allow this to happen.

As we are not oblivious to Eskom’s financial pressures, the City has made proactive suggestions to Eskom in respect of alternative strategies to achieving financial sustainability.

These include:

- Urgently reducing Eskom’s bloated payroll;

- Cancelling tenders with unscrupulous suppliers who provide Eskom with goods and services at massively inflated prices;

- Ending corruption and mismanagement (irregular, fruitless and wasteful expenditure cost the utility R14,6 billion in 2020 and R7,4 billion in 2019);

- Recovering money that has been looted during the period of state capture; and

- Adopting a greater focus on recovering debt from defaulters rather than

targeting those who are paying their bills, who have in effect become ‘soft targets’.

Eskom’s planned increase will further limit struggling businesses’ ability to operate profitably, and to sustain and create jobs. It will destroy hope of economic recovery in South Africa and add to our burden of poverty.

We would like to reiterate that the economic and social costs of Eskom’s desired increase will be dire. The City of Cape Town requests and requires Nersa to say, “No”.

The City of Cape Town’s full written submissions to Nersa is available here.

Issue by Greg Wagner, Spokesperson to the Executive Mayor, 17 January 2022