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The Congress of South African Trade Unions strongly condemns the 31.3% tariff increase granted to Eskom by the National Energy Regulator (Nersa) today, 25 June 2009. It is virtually the same as the 34% increase requested by Eskom and would appear to be a token gesture by Nersa to demonstrate its independence from Eskom.

31.3% is almost four times the current level of inflation and therefore cannot be justified as a response to Eskom's rising running costs. It is clearly another attempt to shift the burden of Eskom's capital costs for restructuring from the government on to the consumers. The consequences will be catastrophic:

§ Consumers will be hit with a massive increase in their cost of living, especially the poorest, who pay more per unit than the big users and effectively subsidise the rich. Although some municipalities help the poorest users, there is still no national scheme to reduce the burden on the poor;

§ Just when the overall rate of inflation was starting to come down, this increase will push it up again, both directly and indirectly, as firms pass on the increased tariffs to their customers, causing yet more increases in the cost of living, which will again hit the poor hardest;

§ Small and medium businesses, already struggling to survive with the impact of the recession, will be walloped with a massive rise in their electricity costs. For many this could be the last straw and we shall see more closures and retrenchments.

COSATU repeats its demand that Eskom's capital expenditure is an investment in the nation's infrastructure. It should not be treated in the same way as running costs but be financed by the government, which failed to provide this money in the late 1990s when Eskom warned that they would not be able to supply the grid without a massive injection of money from government.

The government, which was then toying with the idea of privatising Eskom, refused to pay. This led to the crisis and power cuts of 2008. They must now find the money through a special tax, mainly paid by the corporate sector, to provide this money and save the poor from any more punishing increases.

COSATU will continue to engage through Nedlac with government and business and will argue strongly for the Nersa decision to be reversed, and replaced with an inflation-related tariff increase. Should no solution be agreed, the federation reserves the right to take action to protect the living standards of its members and the overwhelming majority of South Africans.