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Eskom’s greed will lead to bankruptcy

Eskom’s greed will plunge large numbers of consumers and business into debt according to an economist and a debt expert.

Last week Eskom made an urgent application to the National Energy Regulator of South Africa (Nersa) to increase the electricity tariff by 25.3% for the 2015/2016 financial year.

This includes the 12.69% price increase that has already been approved by Nersa.

If Nersa approved the full 25.3% tariff increase, it would be a “catastrophe” for the consumer that would see millions more plunged into debt followed by a slew of bankruptcies for businesses and private individuals.

Nersa said “it was considering the application taking into consideration the urgent need to stabilise the electricity network to avoid a possible total blackout and Eskom’s operational and financial challenges”.

Neil Roets, CEO of debt counselling firm Debt Rescue, said: “Consumers will simply not be able to absorb an increase of this magnitude without very serious consequences.”

“Bearing in mind that virtually all goods and services are dependent on electricity, this is going to result in substantial increases in the prices of virtually every commodity that South Africans rely on including food, transportation and pretty much everything else.”

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.

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

He said the fact that total consumer debt now tops R1.427-trillion – 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,” Roets said.

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