One unintended consequence of the massive electricity hike for which state power utility Eskom has applied, is the effect it is having on already wounded relations between the African National Congress (ANC) and its left-wing allies.

While tensions between the ANC government and its left-wing allies have lately been worsening due to differences over economic policy and other issues, the application by Eskom for the tariff hike to be spread over three years is exacerbating those tensions.

Last week, we reported that far from being the "smoothed" hike Eskom claims, the 45 percent per year hike in reality implies a massive increase of 204.9 percent over the three years. It will, calculated with the previous two hikes of 27 percent and 31.3 percent, represent a total increase of 408.4 percent over a period of five years.

Now the National Union of Mineworkers (Num), the largest labour union affiliated to the ANC's ally, the Congress of South African Trade Unions (Cosatu), has strongly criticised Cabinet's endorsement of the Eskom tariff increase application. Num also operates in an economic sector that has been the hardest hit by Eskom’s inability to deliver and manage South Africa’s electricity supply effectively.

Negative impact on workers

Num expressed its concern that the government had endorsed the Eskom application "even before an economic impact assessment (was) completed, let alone the completion of regulatory processes".

Num general-secretary Frans Baleni was reported in the media as saying his union was very worried "that these huge increases are going to have a negative impact on workers as overhead costs are pushed beyond 30 percent in most mines".

Baleni is alluding to possible widespread layoffs in the mines as costs will rise to badly skewered levels in a sector already under immense pressure after commodity prices and demand fell in tandem with the global economic crisis. Although considerable retrenchments did occur, the mining sector was able to minimise this with its own initiatives complemented by government programmes.

But the Eskom tariff application has already begun taking its toll in the sector and in respect of jobs. The announcement by Eskom of its tariff application was followed by an announcement by mining company, Rio Tinto, that it was scrapping its plans to build an aluminium smelter at Coega — the Eastern Cape industrial development zone that includes the new port of Ngqura.

Unable to afford huge power hikes

More such losses of investment remain a possibility, resulting in further lost job-creation opportunities.

Num is calling on the government to consult over a wider front with interested parties and to consider other alternatives to its massive increase move. Other trade union leaders concur with Num and Baleni that the tariff increases pose a real risk to business and industry, that companies will be unable to afford the huge power cost hikes, and that workers will consequently be retrenched. That, they say, is apart from the increased burden that workers and their families will have to bear as a result of the increased cost of living caused by tariff hikes.

As we pointed out last week, apart from the negative effects for investment, the tariff hikes will also suck in billions of disposable income off consumers. This will pose a further serious threat to the economic recovery of other sectors of the economy.

It should be kept in mind that individual households will be hit with a double whammy increase, as they will also be paying 14 percent VAT on much higher amounts for the electricity they consume.

Cosatu lashed out at Eskom

Two weeks ago, before it became clear that the government would be endorsing Eskom's tariff application, Cosatu lashed out at the power utility, saying it was "extremely angry at Eskom's outrageous and insensitive request for a whopping 45 percent a year electricity tariff hike over the next three years".

Cosatu said it would mean that by the end of the three years, "consumers would have been hit by a 200 percent hike in electricity tariff hikes".

Cosatu added that it rejected this outright, particularly given the continued absence of clear and effective measures to protect the poor. The federation said that should this trend of steep electricity hikes continue, many of the poor will not be able to afford electricity at all, and would turn to more dangerous sources of heat and light, such as paraffin and gas.

Therefore Cosatu will campaign for the amount of free basic electricity for the poorest users to be increased by the same percentage the electricity tariff would have increased by over the next three years.

Unable to survive increases

The union added that as well as the direct blow to residential consumers, the proposed increase "flies in the face of government's efforts to create decent work through small and medium businesses, many of which will be unable to survive such increases year after year".

However, following the government's endorsement of the hike application, Cosatu's anger is now also turning towards the government, with the Num statement being the most direct attack in the public domain so far.

This issue could become much bigger in weeks to come. And with Num being the largest union and its sector of operation being possibly one of the first to be hit by the consequences of the hike if approved, most of the pressure on the ANC and the government is likely to come from this quarter.

Article courtesy of Leadership Magazine.

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