Although it is still painful for business and consumers, the decision by the National Energy Regulator of South Africa (Nersa) to allow a much lower increase of 12,7% in Eskom tariffs, instead of the 36% previously sought by Eskom, is a significant outcome.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says Nersa has acknowledged the critical inputs it received last year from extensive public hearings on Eskom’s original massive application and its potential socio-economic impact.

“The usual cost-plus approach to Eskom finances has therefore now been considerably ameliorated. However, even with a 12,7% Eskom tariff hike, allowance must be made for the additional municipal surcharges that usually follow such tariff rises. Hence the electricity costs of doing business will inevitably rise later this year.”

According to Prof Parsons, higher power tariffs will nonetheless also encourage the search for alternative energy options and further reduce dependence on Eskom. “The Nersa decision does not resolve the much bigger challenge of how Eskom is to be properly financed in the longer term – and how soon its present restructuring will facilitate more viable outcomes for the troubled state-owned enterprise.”