Commenting after Seifsa’s (Steel and Engineering Industries Federation of Southern Africa) presentation to the National Energy Regulator of South Africa (Nersa) on Eskom’s Multi-Year Price Determination Regulatory Clearing Account (RCA) for 2014-2015, 2015-2016 and 2016-2017, Seifsa’s Chief Economist Chifipa Mhango said any tariff increase coming out of this process would scupper any hope of a meaningful business recovery in a sector that has over the past few years struggled amid rising power costs and erratic supply, rising imports and subdued demand, among other challenges.
In 2019 alone, the Metals and Engineering (M&E) industry spent a total of R11.7-billion in electricity costs. Although the level of impact varied across sub-sectors, Chifipa said nevertheless Seifsa had observed a huge impact in the basic precious and non-ferrous metals, with that sub-sector having a significant share of electricity costs in its cost structure.
Chifipa added that electricity was a crucial component of the M&E cluster of industries, and production processes in some of the high energy-intensive sub-components were heavily dependent on power supply. High electricity prices affected not only the productivity of companies in the sector, but also their profit margins since they could not pass these increases onto consumers, who were themselves under considerable financial strain.