If the 14.2% increase in electricity tariffs in South Africa next month were not enough, Eskom have requested to the National Energy Regulator of South Africa that tariffs be increased by 60% and not just by 14.2%. If this increase is granted, it would put a lot of pressure on inflation and interest rates in South Africa which are already high.

How this situation is going to be resolved will be interesting. On one hand Eskom want the tariffs increase as they are saying their costs are escalating and they need to pass the cost onto the consumer. Eskom also need more money in order to develop more infrastructure to meet the growing power demands in the country.

But on the other hand, and increase of such large margins would surely make inflation sky rocket. Inflation is already high in South Africa and such an increase would make the consumer suffer. The Central Bank has targeted inflation to be between 3 – 6% but there would be no way of achieving this in the near future if this 60% increase gets the green light. South Africa is already preparing for a possible interest rate next month as fuel and food prices continue to rise.

South Africa has had some of the cheapest electricity in the world for a long time and maybe it is time for the tariffs to be inline with the rest of the world but at what cost? It could be seen from this angle: if Eskom get the go ahead to increase tariffs, would this mean there would be a guarantee that there will be constant electricity supplies to the country? Not immediately though as there would not be an overnight guarantee that there would be no power cuts even if the tariffs are increased. It will take a few years for all the necessary infrastructure and planning for new power sources to be obtained. It would be acceptable for most consumers if they were to pay higher tariffs and be guaranteed of electricity but at the rate things are going, for the immediate term anyway, consumers may still have to pay ‘an arm and a leg’ for electricity and still experience power shortages. It seems like a loose-loose situation for the consumer.

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