The Minerals Council opposes Eskom’s application to NERSA for a 15.5% electricity tariff increase in terms of MYPD4

The cost of electricity constitutes a significant component of the total input cost basket of mining, particularly in the gold and platinum sectors. Excessive increases in electricity tariffs have had a detrimental impact on the overall inflation profile of the mining sector. Between 2006 and 2017, South Africa’s electricity tariffs have increased by 488% across all categories and industries. Over the same period, the mining industry experienced increases of 523%, the highest increases experienced by any sector. The average electricity tariff increase of 15.5% per year between 2006 and 2017 reduced fixed investment by a cumulative R103.2 billion and contributed to the loss of around 53,500 mining jobs - of which 34% can be directly attributed to the exorbitant increase in the cost of electricity.

If history is anything to go by, the 15.5% annual electricity tariff increase currently being applied for by Eskom will cause considerable damage not only to Eskom’s mining customers, but to the utility’s income and future.

Should Eskom’s application be approved, the Minerals Council estimates that the number of mining (baseload) customers would decline by 36% by the end of the MYPD4 period. The result would be a severe reduction in Eskom’s income, triggering drastic increases in the unit cost of electricity for other customers which would further reduce Eskom’s customer base and ultimately lead to its collapse.

Resources:

• Media release: Minerals Council opposes Eskom’s MYPD4 application
• Presentation: Minerals Council position: Eskom’s application to NERSA for a 15.5% annual electricity tariff increase
• Infographic: Submission to NERSA: Eskom application for electricity tariff increases (MYPD4)
• Infographic: Submission on: The draft integrated resource plan (IRP) 2018