South Africa: Eskom Tariff Increase Would Be Catastrophic for Consumers – Expert

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Reuters reported that South Africa was considering either partially privatising Eskom or putting up some of its assets for sale in order to secure funding for the power producer and resolve an energy crisis (file photo).

If Eskom’s tariff increase is approved, it would be a catastrophe for the consumer and would see millions more plunged into debt followed by a slew of bankruptcies for businesses and private individuals, according to a debt expert.

The National Energy Regulator (Nersa) said on Wednesday that they would announce their decision as to whether it will authorise Eskom’s application to hike tariffs by 25.3% on June 29, 2015.

Debt Rescue CEO Neil Roets told News24Live on Wednesday that “consumers are already over indebted … so this tariff hike would be devastating”.

The increase would affect consumers directly and indirectly. “If electricity prices go up, then it means that the prices of other goods and services will also go up in line with that,” he said.

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“Consumers … will just not be able to afford that.”

He warned that South Africa’s middle class, which is the fastest growing in the world, could be pushed back into poverty as a result of the increases.

Consumers should look at their budgets and take into consideration the possible electricity hikes, said Roets.

Planned increase was totally unfounded

Independent economist Dawie Roodt said the planned increase was totally unfounded.

“I accept the fact that Eskom needs more money, but this could be found in greater efficiencies within the company rather than once again nailing the consumer.”

He said the utility’s current crisis was largely the result of abysmal management and a lack of leadership.

“The entire top structure of Eskom is there in an acting capacity and therefore lack the authority to provide the kind of leadership that could get the company out of the hole that it has dug for itself,” Roodt said.

Debt warning

Roets said it was inevitable that Eskom’s insatiable need for ever more cash injections from the public will result in growing numbers of consumers ending up with debt that they could not service.

“The most important thing for consumers to do once they get into financial trouble is to seek help from a debt counsellor in order to go under debt review.

“This process provides immediate relief by protecting the indebted person against predatory debt collectors while allowing them to pay off their outstanding debt in smaller instalments over a longer period of time.”

He said the fact that total consumer debt now tops R1.427 trn (according to the latest figures released by the reserve bank) shows that consumers are having a very hard time.

“We know from figures released by the National Credit Regulator and Statistics South Africa that the majority of indebted consumers already owe 75% of their monthly pay to creditors.

Source: Fin24

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