Electricity price lies
There are lies being told on the electricity issue in South Africa and Eskom is discriminating on price and pushing consumer electricity prices in South Africa into the top half of charges worldwide, according to a leading economist.
Chief economist of Economists.co.za, Mike Schussler, told the National Consumer Forum in Midrand on Friday that Eskom sells electricity at cheaper than cost to internationals, but consumer prices have quadrupled between 1996 and 2009.
“If you say you are not making money, but are giving a 34% increase to people paying above costs, what are you doing to those you are selling to below cost?” asked Schussler.
“It is not correct to say we have the cheapest electricity in the world – rather tell us industry has the lowest prices in the world,” he said.
Industry pays the second-lowest price for electricity after internationals in South Africa, while residences are on top and paying well above cost.
“How can we export electricity at a price one-third of what consumers pay and then ask for 34%?” questioned Schussler.
He notes that high coal prices were blamed, but these have now dropped 60-70%.
“There are lies out there. The problem we have is a lot of smoke and mirrors get held before our eyes,” Schussler told the delegates. Government, via Justice Minister Jeff Radebe and the Department of Trade and Industry, had just spoken at the Forum, which zoned in on placing consumer issues, like price discrimination, on the national agenda.
Schussler says that many people don’t pay for electricity in SA, while the middle class has to pay extra and has to pay for industry as well.
Schussler did a breakdown of average Eskom increases between 1996-2008 and found that residential consumers again suffered the biggest price increases.
“Which residential consumer gets as much money as Anglo American, for example?” he asked.
“The fact is Eskom discriminates on price.”
Schussler also looked into municipality profit margins on sales of electricity and water and showed that there were margins of over 100% in three provinces and 73% in total for SA after giving the free electricity to those who can’t afford it.
“And they keep talking about looking after the consumer talk in SA is cheap. Which business can go into business and make a 100% profit margin – certainly not the guy selling tomatoes on the side of the road,” said Schussler.
“Government also needs to know what consumer rights are,” he said.
Schussler went further and said that while there is around 56 billion rand in private debt in the private sector – including cars, houses etc – on municipal side there is a total of 42.2 billion in municipal bad debts.
“This is a huge problem,” said the economist.
“In Gauteng we have 20 billion rand in debts because people can’t afford these high prices because of high profit margins. So people who do pay land up paying more and then it dumps more people into poverty as they are cut off and then water is cut off, and then as consumers we end up with potholes in our roads or municipalities not delivering other services,” he said.
“The honest consumer is paying a lot more than just for themselves,” concluded Schussler.
Eskom Electricity pricing discussion
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