National Economic Development and Labour Council (NEDLAC) appointed a United Kingdom-based company to undertake a review of Eskom’s business model focussing on the following three issues: (1) primary cost drivers of Eskom’s electricity supply, (2) demand, supply and tariff setting and (3) sustainable revenue and funding models.
Preliminary findings on the context of drivers of electricity prices for Eskom include the following:
o The flow of electricity from generation to final consumption in South Africa.
o The economic importance of sectors that consume the most electricity.
o Electricity costs as a proportion of total operating costs for firms.
o Impact of electricity price increases on the profitability of sectors/firms.
o The proportion of electricity costs on poor households’ income compared to
higher income groups.
o Electricity makes up more than 20% of municipal expenditure.
o More than a third of municipal revenue comes from electricity sales.
o Over the past decade, nominal electricity prices have increased by more than
350%.
The company will also be investigating the impact of Eskom’s sustained and significant price increases on the economy, some of the impacts can be gauged regarding reduced GDP growth, an accelerated inflation rate and reduced employment as direct effects.
The final report should be available by the end of September 2018. Should you like a copy of The Review of Eskom’s Business