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While BUSA fully understands the financial pressures on Eskom - and the need to price electricity more realistically in SA - it remains concerned about the inevitable negative impact on the economy of the latest tariff increase, especially in a time of severe economic recession. BUSA has always advocated an optimal mix between tariffs, loans and government finance to fund Eskom. The unintended consequences of this decision may well swamp the intended ones.

BUSA is therefore concerned at the serious cost implications for business and consumers at a time when the Reserve Bank is reluctant to cut interest rates more rapidly partly because of the upward pressure that rising electricity costs have on inflation. The subsequent additional increases in power tariffs by local authorities will escalate the cost impact on the economy, together with rises in other administered prices such as health care costs, municipal taxes and special levies. The ‘bunching up' effect of administered prices could pose a risk to price stability.

BUSA welcomes the fact that the tariff decision will not be retrospective to 1st April 2009 as requested by Eskom, and that Eskom must in future submit its price increase applications to NERSA six months prior to the implementation date of the price increase. The strong NERSA commitment to conduct a verification of all Eskom costs is also positive - and that costs determined not to have been efficiently incurred in line with MYPD rules will be clawed back.

BUSA believes that the way forward lies in developing a proper funding model for Eskom - which is long overdue - as soon as possible. It is also necessary to evolve an overall policy on administered prices which is properly aligned to growth and stability goals. This will give business the necessary predictability and certainty in these critical areas of policy. BUSA thus believes that a discussion on electricity prices and the funding of Eskom requires national dialogue, possibly in Nedlac. It is important to have an urgent dialogue on how to balance the immediate needs of the economy and industry with the long term objectives of Eskom.