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Eskom’s proposed tariff increase would push millions of consumers into debt: experts

Experts warn that Eskom’s proposed additional tariff increase will have a detrimental impact on consumers

CEO of Debt Rescue Neil Roets says the proposed tariff increase, which is currently being considered by the National Energy Regulator of South Africa (Nersa), is going to have a serious impact on consumers.

“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.”

With consumers already struggling to pay off their debts, Roets says Eskom’s tariff hikes will result in growing numbers of consumers with debt they simply cannot service.

“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,” he says.

Additionally, the latest figures released by the Reserve Bank have shown that total consumer debt now tops R1,427 trillion, which Roets says shows that consumers are having a very hard time.

He advises those in financial trouble to seek help from debt counsellors, so that they can benefit from 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 installments over a longer period of time.”

On Friday Eskom made an urgent application to Nersa to increase the tariffs to 25,3%.

This tariff increase includes a 12,69% tariff increase, which has already been approved by the energy regulator. Consumers started paying the increased tariffs in April.

According to Moneyweb Eskom needs R52,8 billion to pay for the excessive running of its diesel turbines and power acquired from independent power producers in terms of the Short-Term Power Purchase Programme.

Independent economist Dawie Roodt believes however that Eskom could recover the money it needs if it became more efficient.

“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 adds that Eskom’s leadership crisis, with all its executives operating in acting positions, is one of the key reasons the organisation is unable to get out of this crisis – no one has the authority to get the company in order.

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