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The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) today welcomed the court’s decision to set aside the electricity price increase approved by the National Energy Regulator of SA (Nersa) a few months ago.

Nersa had previously approved Eskom’s application to increase its electricity tariff from a previous hike of 3.4% to 9.4%, applicable from 2016. At the time of these developments, SEIFSA condemned the increase and raised concerns on the impact of expensive electricity on the already pressured metals and engineering sector.

Commenting on the court’s decision to set aside the increase, SEIFSA’s Chief Economist, Mr Henk Langenhoven said: “Electricity is an absolutely essential input for the metals and engineering sector. Any price increase in electricity further erodes the sector’s competiveness and contributes to job losses. It is a fact that electricity inflation has been rising significantly faster during 2016 than other costs. The fact that this has been reversed by the court is appreciated.”

Mr Langenhoven said that, with the metals and engineering, mining, construction and auto manufacturing sectors contributing nearly 20% of the country’s GDP, it was important to keep in mind that higher electricity increases would reverse any gains made in alleviating challenges in these key sectors.

Mr Langenhoven said that stability in electricity supply is almost as crucial as its availability. He said that current lower electricity demand from the sector because of production declines has contributed to alleviating some of the pressure and allowed for increased maintenance to be done by the utility. He expressed the hope that the court ruling would not see Eskom cutting back on its maintenance plan.

“We are concerned that any possible appeals by Eskom and/or Nersa may lead to a whole period of uncertainty regarding electricity prices. Such a situation would not be conducive to business planning and investment,” Mr Langenhoven said.

Issued by SEIFSA