Power hike will be catastrophic

CONSUMERS already battling high levels of debt to cope with ever-increasing food prices and other costs are in for a nasty sur¬prise, say experts. That’s if the National Energy Regulator of South Africa (Nersa) approves Eskoms proposed 25 per¬cent tariff increase.

Neil Roets, chief executive of debt coun-selling firm, Debt Rescue, said it would be a “catastrophe” for the consumer should Nersa approve the increase which would see millions more plunged into debt followed by a slew of bankruptcies for businesses and individuals.

He said the latest increase, if granted, would be an “unmitigated disaster”.

“Consumers will simply not be able to absorb an increase of this magnitude with¬out 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, transporta¬tion and pretty much everything else.”

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 effi-ciencies 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 leader¬ship that could get the company out of the hole that it has dug for itself,” said Roodt.
Roets said, according to the latest figures released by the reserve bank, the fact that total consumer debt now tops Rl.427trillion, is proof 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 percent of their monthly pay to creditors.”
Kelli Knutsen, marketing manager for the IDM Group (Intelligent Debt Manage¬ment) said this is bad news for both indebt¬ed consumers and small businesses.
She said with the current debt situation in South Africa – where 10.26 million con¬sumers have impaired credit records – consumers will need to dig deep into
their pockets.

Knutsen said running a small business at a profit is difficult at the best of times and increased expenses will shrink profit mar¬gins.

“Consumers and businesses need to take these additional expenses into account and find ways to cut down on other expenses to make room in their budgets.”
Clif Johnston, vice-chairman of the South African Consumer Union, said for all con-sumers, any increase in administered tariffs is problematic as this means that money cur¬rently being used for other purposes has to be diverted.

“For the wealthy this means less money for leisure and investment, but for the poor it will mean less money for food and will push many more of these consumers into debt as they struggle to make ends meet. As a result of Eskom’s already hefty tariff increases and coupled with their energy-sav- ing appeals, most consumers have already reduced their consumption to a minimum.”

Johnston added that it is unlikely that higher electricity tariffs can be compensat¬ed by any further reductions in consumption.
Consumer activist Ina Wilken said: “Eskom’s insatiable need for more and more cash injection from the public will result in a growing number of consumers ending up with debt they cannot pay.

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