JOHANNESBURG, Nov. 17 (Xinhua) -- The South African Chamber of Mines on Friday opposed the power utility, Eskom's application to raise tariff by 19.9 percent, saying it will affect the country's economic growth.
The Chamber of Mines chief economist Henk Langenhoven presented their response to Eskom's application for a tariff increase at the hearing by National Energy Regulator of South Africa (NERSA). He stated that increasing the tariff will lead to downward spiral for South Africa, of higher electricity prices, lower growth and less electricity consumption.
Langenhoven warned that if Eskom is allowed to hike tariff, the state owned enterprise will be key contributor to 'no growth' for South Africa and credit downgrades.
"Two scenarios (20 percent increase or government support) are not viable - they are catastrophic. Without structural adjustment in the electricity sector there is no solution," said Langenhoven.
Langenhoven said Eskom is responsible for their huge budget shortfall and failure to service their debts. He said if the increase is allowed, it will result in 600,000 job losses in the mining sector and reduction in the contribution by the sector to the GDP by 5-9 percent.
He said the increase will lead to decline in economic growth. The Chamber of Mines economist suggested that short term solutions be found to prevent Eskom from failing and the economy from suffering irreparable damage. He said any short term solutions must be conditional on an immediate structural adjustment program to be undertaken by the utility.
The Chamber of Mines suggested that Eskom should accelerate the completion and commissioning of the new, more efficient power stations to solve the situation. He added, "NERSA must pursue the least damaging solution to deal with Eskom's impending cash crunch. Drastic changes are needed at Eskom to bring Eskom's operational cost (primarily head count) in line with international standards."
The Chamber of Mines represents 90 percent of South Africa's mining production by value.
