Electricity tariff hike ‘will devastate agri industry’

Agri organisations believe Eskom’s 6.5% tariff increase will have a devastating impact on the agricultural industry

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Agricultural organisations are outraged over the decision by the National Energy Regulator of South Africa (Nersa) to approve Eskom’s application to recover R13.3 billion from electricity users over the next two years.  

Nersa has given the cash-strapped power utility the green light to increase the cost of electricity by 6.5%. The state-owned enterprise Eskom made applications to Nersa in August 2019 to claw-back R27.3 billion from electricity customers through power tariffs saying that it needed to cover costs incurred for the 2018/19 financial year. 

AgriSA and Free State Agriculture (FSA) have since openly expressed their criticism towards Nersa’s decision. Electricity is a major input cost component of most intensive food production systems such as dairy, piggeries, poultry and irrigation agriculture. 25% of the nations food production is dependent on irrigation.  

Free State Agriculture President Francois Wilken. Photo: Conrad Bornman
Free State Agriculture President Francois Wilken. Photo: Conrad Bornman.

In a media release, Free State Agriculture (FSA) president Francois Wilken says this decision will put severe financial pressure on agricultural enterprises and will in turn have implications for the cost of food in the country.  

“In the agricultural sector this price increase does eventually put pressure on consumer prices for food, but initially is absorbed by the farmer, who is a price taker.”  

Electricity constitutes a significant proportion of the variable costs of the farming industry, says Agri SA. Eskom, who supplies more than 90% of the country’s electricity, has been struggling with high debts and faulty power stations since last year. It is not up to the South African citizen to rescue the debt laden state-owned enterprise, they say.

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Nicol Jansen.

Agri SA says the organisation on numerous occasions has moved that tariff increases be implemented according to the Eskom Retail Tariff Structural Adjustment (ERTSA) methodology “whereby fixed cost tariffs are increased by the same percentage as electricity tariffs 

Agri SA has undertaken several actions to raise this issue with NERSA and Eskom, but they say this has fallen on deaf ears.  

“We lobby to mitigate electricity and fixed cost tariff increases, whilst we have made significant strides in opening up regulations for the use of renewable energy in agriculture,” says Nicol Jansen, Agri SA’s chairman for economics and trade centre of excellence 

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