ESKOM may be pleased with its performance and its profit of R8.4 billion last year but its annual report makes grim reading for business, says the Cape Chamber of Commerce.

“The report reveals that we subsidised the aluminium smelting industry in Kwa-Zulu Natal by R1.4 billion in the last financial year and that without this loss Eskom would have made a profit of nearly R10 billion”, said Mr Michael Bagraim, President of the Chamber.

He said the profit was entirely due to high tariffs and Eskom now wanted further tariff increases of about 25 percent in the three-year period from 2013 to 2016.

According to the report, the average selling price of electricity was 24.4 cents a unit in 2009 and it will be just over 50 cents this year. When the proposed new increases were added to those already approved the average price would be nearly than R1 in 2014. “This will be something like a 400 percent increase in six years and the effect on the economy will be devastating,” Mr Bagraim said.

“I don’t think any other industry could get away with tariff increases of 400 percent in six years and survive.”

Mr Peter Haylett, chairman of the Chamber’s Industrial Focus Portfolio Committee, said the increases and the projected future increases would make Eskom electricity more expensive than some forms of alternate energy. In particular it made electricity from combined cycle gas turbines viable and the development of a major gas industry had now become a priority in order reduce dependence on Eskom.

 “Some companies are already planning to generate their own electricity using solar and wind power and we can expect to see this trend grow.”

He pointed out that a supermarket group had already installed solar panels on the roof of one store in Gauteng and we could expect more. “In the Cape the Villiera wine farm has put hundreds of solar panels on its cellar roofs and is now self-sufficient for most of the year.”

He said there was also a great need to save electricity by using it more efficiently but this was difficult for industry as there was no alternative way to run machinery while the plastics industry, for instance, could not use less electricity with cutting back production.

“These high electricity costs will make it more difficult for local manufacturers to compete with imported products and exporters will find that their ability to compete in the global markets is being eroded.”