JOHANNESBURG, 20 NOVEMBER 2017 – Granting Eskom its requested tariff increase would deliver a near-fatal blow to the struggling metals and engineering sector, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) said today (Monday, 20 October).
Making a presentation at the National Energy Regulator of South Africa (NERSA) hearings in Midrand, SEIFSA Chief Executive Officer Kaizer Nyatsumba strongly opposed Eskom’s application for electricity tariff increases, saying granting the utility its requested tariff increase would cripple manufacturing in general and the metals and engineering sector in particular.
“It will worsen the plight of the ailing metals and engineering sector,” he said.
SEIFSA Chief Economist Dr Michael Ade echoed Mr Nyatsumba’s views that the steel and engineering sector is still struggling to meet the pre-crisis demand production levels attained in 2007. Since then, recovery in the production has been modest at best.
He said that if the tariff increase application goes through, it will be a critical setback for the sector’s productivity. The sector exports 40 percent of its production and international competitiveness is vital for its survival. An inevitable consequence of the proposed 19.9 percent hike by ESKOM will be more job losses.
“High electricity tariffs add to production costs, a situation simultaneously accompanied by declining average change in selling prices received by local producers and squeeze profit margins. Although the real GDP just recently picked up in the sector, domestic demand conditions are still tough,” Dr Ade said.
He said a high electricity tariff increase will stifle output in the metals and engineering (M&E) sector. He said that if NERSA felt that an increase for Eskom was necessary, then “it should be at a much lower percentage that has been requested”.
Dr Ade said the metals and engineering sector’s share in manufacturing output is nearly 30 percent and contributes to approximately 3.6 percent of the gross domestic product to the South African economy. He said that last year the sector provided employment to around 480 000 people directly and significantly.
Marketing, Sales and Communications Executive
Tel: (011) 298 9411 and 082 602 1725