Energy Price Hikes Hit Cape Town

BUSINESSES in Cape Town, South Africa, are facing economical strains as the latest round of electricity price hikes will hit the city hard.

From today, the city’s electricity tariffs increase by 19.94 percent, as Eskom, South Africa’s state owned utility, has increased its bulk selling price to Cape Town by 26.7 percent.

The Cape Town Regional Chamber of Commerce and Industry warns that the increases are a big blow for city and regional businesses, who will be forced to pass on the increased costs to their clients and customers.

Not all consumers will be affected by this price rise as their power is supplied directly by Eskom and not via the city, but electricity tariffs from Eskom already increased by 25 percent in April.

The Cape Argus reports that Cape Town lighting firm, Eagle Lighting, have seen “scores of big businesses” buying around R3 million ($440,000) worth of energy-saving devices to improve the energy efficiency of their facilities.

The Chamber say the price hike is bound to hurt local businesses, with Viola Manuel, an Executive Director of the Chamber, saying the hike was being added to an already high price for energy, with more price increases likely.

“Most of the annual increases have been in the region of 25 percent, while the inflation rate has been below six percent. This has put businesses under severe pressure. The savings that could be made have, in most cases, been made. They now have no option but to pass the price increases on to consumers,” Manuel said.

Manuel added that it is going to be more difficult for Cape Town businesses to compete with imported products, while South African exporters are “losing their competitive edge.”

The National Energy Regulator of South Africa allowed Eskom to make a tariff hike of 24.8 percent last year, with a similar increase of around 25 percent is planned for next year. Yet, this week Eskom reported a 28 percent growth in revenue for the past financial year, driven by the increased tariffs.

Picture of Cape Town with Table Mountain in the background by Gary Bembridge

Friday 1st July 2011

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