Electricity pylons. Photo: THINKSTOCK
Photo: THINKSTOCK

MANUFACTURING companies should get lower electricity price increases linked to the rate of inflation, Department of Trade and Industry director-general Lionel October said on Monday.

He told a panel discussion hosted by the department there must be exemptions in electricity prices for the embattled manufacturing sector. "We’ve moved from being the cheapest electricity producer to the most expensive," he said.

"There must be an exemption for manufacturing for at least inflation-linked price increases," he said. The current inflation rate is 5.6%.

Power utility Eskom has asked the National Energy Regulator of South Africa to give the go-ahead for tariff hikes of 16% over each of the next five years. That process is now open for consultation.

Meanwhile, Business Unity South Africa (Busa), a lobby for big business, said it believed the requested average tariff for Eskom’s multiyear price determination could be as low as 10.8% and still reflect costs.

"The current economic climate, apparent lack of mitigating options and additional price pressure from municipality markups and (a) potential carbon tax, all serve to accentuate the vulnerability of firms to the proposed tariff increases," Busa said in a statement.

Busa said annual price increases of 16% would have "significant negative long-term implications for households, industries and the economy at large".

Nominal electricity tariffs have already tripled over a five-year period, Busa noted.

In the context of global demand, further "excessive" increases in the cost of electricity would affect the competitiveness and output of many South African firms.

Meanwhile, cement maker Afrisam on Monday became the first construction materials company in South Africa to sign up to Eskom’s 49M energy initiative, as part of its journey towards better energy efficiencies.

The company had reduced its carbon emissions by 35% since 1990 and improved its electrical energy efficiencies by 18% for each ton of cement produced from 2000 to last year. Afrisam has also cut thermal energy from the coal-firing process needed to make cement by 37% in the latter period.

CEO Stephan Olivier said Afrisam had been engaged in energy savings since the mid-1980s, "before it was popular to do so".

"All businesses need to make a profit, so if you can reduce your production costs it is always useful," Mr Olivier said.

Deputy President Kgalema Motlanthe launched 49M last year in response to the country’s constrained power supply.

The campaign is championed by Public Enterprises Minister Malusi Gigaba, with support from corporations, government departments and households.

Eskom CEO Brian Dames said on Monday the programme had the support of about 70 South African listed companies, along with the country’s main trade unions.

© BDlive 2012