The latest decision by the National Energy Regulator of South Africa (NERSA) to grant Eskom an increase of 9,4% in response to its application of 15% is bad news for the economy at this stage.

This is according to renowned economist Prof Raymond Parsons from the North-West University’s (NWU’s) Business School.

He says this immediate decision represents about 60% of what Eskom requested and is approximately 50% above inflation. “However, as the chairperson of NERSA pointed out, it follows on a previous rise of 4%, thus making for an overall rise in electricity tariffs of about 14% for this year.

“The net impact at local authority level will be greater in view of the usual 'add on' to electricity tariffs made by municipalities. At most, the NERSA decision on tariffs should have been capped to the inflation rate in present circumstances.”

Prof Parsons says that, if combined with other current cost increases in the economy as well as the ongoing impact of load-shedding, an excessive increase in electricity tariffs will now cumulatively hit both consumer spending and business costs. 

He adds that the Eskom tariff decision unfortunately also comes at a time when the economic recovery remains slow and patchy. 

“Forecasts of economic growth in 2019 will now possibly have to be reduced to about 1,3%, from earlier higher expectations of approximately 1,5% growth in the recent budget.”

According to Prof Parsons, the rise in electricity tariffs reflects much what has gone wrong in Eskom. 

“NERSA's intention to conduct further forensic investigations into the affairs of the power utility is therefore welcome. The NERSA decision emphasises again why the restructuring of Eskom (to remedy the management, operational and financial failures), remain urgent if confidence in Eskom as a key player in the economy is to be restored”.