Around 88% of respondents in the Manufacturing Circle Investment Tracker survey for the third quarter noted that they still relied on electricity as the primary energy source for their organisation, followed by gas and other energy sources.
For this reason, the Manufacturing Circle is imploring Eskom to resolve its own inefficiencies, including lower productivity, before requesting its proposed 20% increase in electricity tariffs for the 2018/19 financial year.
“It is hardly surprising that such a price hike will raise the cost of production and reduce profit margins,” Manufacturing Circle chairperson André de Ruyter said on Wednesday.
Speaking at a media briefing, he pointed out that Eskom’s rationale for the tariff hikes was that there was low demand, but De Ruyter said this was contradictory as the power provider should rather drop its prices in a low-demand scenario.
“As companies will not be able to fully recover this from customers, who will also be negatively impacted, it could result in a reduction of employment levels and withholding of investment. South Africa can ill afford either of these measures and we strongly advocate that any increase in the electricity price cannot be above consumer price index,” he said.
Speaking to Engineering News Online, he further pointed out that the manufacturing industry was a significant employer in South Africa, having a multiplier effect and, although not advocating for job cuts at the power utility, De Ruyter pointed out that it may be necessary.
Eskom could further cut its cost base by implementing rationalisation strategies that include reducing employment levels, a similar route the manufacturing sector would have to follow in the context of sluggish domestic and global demand.