NEREN RAU SACCI CEO JANUARY

Transcription

1 MYPD 3 Presentation NEREN RAU SACCI CEO JANUARY 2013

2 Presentation Overview SACCI Eskom Consultations in 2012 SACCI Proposals SACCI Member Perspectives Economic Impact of Tariff Increase at 16% and 10% Overview of Impact of Tariff Increase on Members Selected Business Outcomes at Higher Tariff Level

3 Recent Eskom-SACCI Consultations Wide stakeholder engagement and member views are crucial in forming SACCI policy proposals Recent SACCI - Eskom Leadership Engagements: January 2012: Deputy Minister of Public Enterprises and Eskom CEO member briefing on Electricity Supply Conditions June 2012: MYPD3 briefing to business leaders September 2012: Eskom hosted the SACCI leadership and members to a briefing on MYPD3

4 Main Proposals Proposal Set 1: Regulate Municipal Surcharges A paradigm shift in municipal electricity pricing is necessary Municipal electricity surcharges must recover the cost of supply and not act as source of cross-subsidisation for other municipal mandates The cost of supply must be linked to the surcharge by an objective analytical framework like a Regulatory Impact Assessment (RIA)

5 Main Proposals (cont.) This is consistent with the single tariff system proposed in the Electricity Pricing Policy (EPP) municipalities will have to show (by way of a RIA) why they need a particular level of surcharge

6 Main Proposals (cont.) Proposal Set 2: Speed up inclusion of private energy production The private sector should be encouraged to become energy self-sufficient Regulation must be improved to facilitate faster conversion to captive grids and back-selling of electricity The regulator must ensure that all regulations and policies be finalised to facilitate the inclusion of IPP s into the grid network

7 Main Proposals (cont.) Proposal Set 3: Revisit L-T outlook and assumptions The long term view of electricity infrastructure development has a profound impact on immediate circumstances Investigate the possibility of engaging in longer term debt trajectories to ease the current tariff increase cycle Reassess of the electricity demand modelled by Eskom to take longer term growth implications into account

8 What level of increase can your firm accommodate? ZERO FLEXIBILITY COMPLETE FLEXIBILITY 66% of businesses indicated that they would be willing to accept above inflation tariff hikes. 8

9 Economic impact of tariff increase 16% increase 2013/ / / / /18 Cumulative effect Inflation GDP Employment

10 Economic impact (cont.) 2013/ / / / /18 Cumulative effect 10% increase Inflation GDP Employment

11 SACCI Member Survey Results Survey of SACCI on impact of electricity prices on business Electricity as total business cost: most businesses (77%) spend up to 15% The average c/kwh price is R1.26: the average margin between end-user prices and Megaflex is 235% Majority (51.9%) indicate that operations will be scaled down to compensate for increased electricity costs 11

12 SACCI Member Survey Results (cont.) 77.8% indicated that their products or services will decline in competitiveness due to the price increase Majority (51.8%) indicated that the tariff increases might result in staff reduction 12

13 Selected quotes on the impact of the tariff increase With continued above-market increases, we are now focused on investing offshore, and ensure our longterm growth concentrates on markets outside South Africa Would be required to cut back on other operating costs, reducing our clients support levels We will reduce certain aspects of customer service in order to reduce electricity usage and in some cases services will be cancelled or changed to pay per usage 13

14 Selected quotes on the impact of the tariff increase All future expenditure on new Capital equipment will take into serious consideration a cutback on operating staff, to accommodate the electricity (price) increases We are now not going to invest in manufacturing locally, we are going to outsource to India, China and Malaysia One company indicated that they are contemplating cancelling a project to provide free or subsidised spectacles to the poor due to eroding margins 14

15 Selected quotes on the impact of the tariff increase As we are making a loss this year, we ll have to cut back even further on our activities next year Direct company taxes and other fees and charges takes care of 60 per cent of income, with the 40 per cent that is left one needs to buy material and pay wages, leaving very little for profit. As our business requires much hand work, the cost of labour is very high. The electricity price will only result in lower activity levels and as a result lower employee levels 15

16 Thank you