COSATU Media Release, 19 March 2008

COSATU condemns Eskom's tariff hike proposal

The Congress of South African Trade Unions is absolutely horrified at Eskom's proposed electricity tariff increase, reported variously at between 53% and 65%. If anything even approaching such increases were to be implemented the effects would be utterly devastating for the country:

  • All consumers would face a massive increase in their cost of living;
  • Tens of thousands of the poorest consumers would be forced to stop using electricity at all, including many who have only recently been connected to the grid;
  • Thousands of jobs would be lost as small and medium businesses were forced to close because of the crippling extra cost of electricity; Far fewer new jobs would be created, as investors would no longer benefit from cheap electricity;
  • Prices of virtually everything else would rise as manufacturers and distributors passed on their extra electricity costs in higher prices, leading to a severe rise in inflation.

COSATU has already condemned the National Electricity Regulator (NERSA) in December 2007 for giving permission for Eskom to increase electricity prices by 14.2%, and deplored the proposal to finance Eskom's accelerated capital expenditure programme through the imposition of drastically increased tariffs on poor households that continue to struggle to meet daily energy needs.

We deplored the impact that this would have on access, delivery and affordability of a key component of the overall package of basic services for the poor. These concerns are multiplied many times over by the latest proposal.

We said then, and repeat with greater force today, that the costs of meeting the country's energy needs must not be passed on to already hard pressed consumers and poor households. Alternative sources of income must be explored. Any price increases should be passed on to heavy industry and high-income earners/households that presently pay much less per unit than many poor households. Any increase be accompanied by greater support and extension of free basic services, including increasing the amount of free electricity.

COSATU demands an extended consultation process on Eskom's latest proposals and a freeze on price hikes until all options have been considered.

Meanwhile COSATU has submitted the following Notice under Section 77 of the Labour Relations Act in protest against the socio-economic effects of Eskom's load-shedding strategy. The latest proposed tariff increase makes it more relevant then ever for the labour movement and civil society to mobilise their forces in support of an energy policy that is pro-poor and pro-worker:


Nature of the Dispute

This dispute arises from the recent announcements in the mining sector of imminent retrenchments due to the recent decision of Eskom to reduce electricity supply to major mining companies by 10%. The unilateral decision of Eskom to reduce electricity usage to mining companies and more recently the failure to support any new major construction initiative has prompted the COSATU Central Executive Committee (CEC) to take a decision in opposing job losses as a result of the energy crisis.

In addition a number of affiliates have been advised by industry employers that any significant reduction in energy supply in key industrial and retail sectors of our economy may likely lead to additional job losses.

COSATU CEC discussed the major national crisis caused by the shortages in
Electricity supply. Already it is public knowledge that thousands of mining jobs are on the line. This comes at the time when unemployment is just under 40% and poverty at around half of the population, with inequalities growing.

We are adamant that workers should not be asked to pay for government's failure to invest in electricity in the late 1990s.

Its plans to privatise Eskom and do nothing when it was warned about the amount of investment that would be required to meet the expected rise in demand for power in the future.

COSATU and the organised labour acknowledges that the current power-cuts and power shortages is a national crisis and affects all South Africans. We will work actively and constructively to help manage the power-shortage and to find a lasting solution.

Accountability questions

However, we believe it is important to also find out the cause of the problem, including the political and managerial shortcomings that have led to a situation where the entire country is affected and the pain of the power-cuts are deep.

Why indeed was the necessary investment not made by government some ten years ago when the first indications were given that we would run short of electricity-capacity? Why were large bonuses paid to the Eskom management when it is clear that some of the top team had been prepared to steer the ship of Eskom to this disaster, without making a big effort to draw all our attention to the impending crisis? Why were coal-stocks allowed to be run down to the critical extent that it has been reported in the media? Why have more energy-intensive investment projects like the additional smelter been approved by government, when it could have been clear that we were running short of capacity for the economy and the society's needs? Why was the first load shedding managed incompetently when senior management should have been aware that problems were inevitable and ought to have had a crisis plan ready? Answering these questions will go some way to removing the growing anger we are facing on the shop floor and create the basis for a positive, forward-looking effort to resolve the crisis. It can also help to ensure that never again will we have such a huge failure of our governance and managerial systems on a critical infrastructure area.

Intervention required

1. As an absolutely basic principle, we should ensure that the costs of the power-cuts are not borne by the poorest in the society, that workers are not retrenched as a result of the power-cuts and that the electrification programme to poor households is not compromised.

2. The package of proposals needs to include short-medium-and long-term measures including:
i. Increasing the public sector generating capacity on an urgent basis which should include developing alternate energy sources
ii. Reducing demand on an equitable basis and without compromising the core development goals.
iii. Ensuring that the cost of electricity for poor communities remain low.

3. We call for a significant financial contribution by government required for:
i. New investment in power-generation,
ii. Shifting to solar water-heating and compact fluorescent lighting, including through regulations to make energy-saving devices compulsory and subsidies to ensure that the poor are not prejudiced, and
iii. Supporting the development of a capacity to locally manufacture these energy-saving units.

4. The criteria for power-cuts/load-shedding are currently very damaging and inequitable. We cannot sacrifice the mining industry in an effort to manage the crisis. The criteria should be urgently reviewed and new agreed criteria should be put in place, which should include:
i. Avoiding disruptions at hospitals, emergency services and other essential services.
ii. Favouring employment-absorbing economic activities in relation to power-usage and
iii. Not damaging the socio-economic goals of the society

In this context, we should be prepared to review projects with a high power-usage and low employment density. The smelters have been identified as a key area of concern.

5. An energy efficiency campaign should be launched, that mobilises the whole of society, led by concrete commitments from government departments, with a view to changing mind-sets and behaviour of consumers and industrial users. In this context we are also prepared to launch a labour campaign to save electricity and to train our shop stewards to be energy stewards to help mobilise workers around the joint programme.

6. We have taken note of a call for the setting up of stakeholder councils at national and provincial level. We support these calls but wish to make the point that the proposed National Council should report on a regular basis to both the Presidency and to Nedlac. It should not be accountable to one line department. Significant policy issues should be referred to Nedlac for consideration. The role of the national council should be:
i. To develop proposals for short, medium and long-term solutions to address the electricity emergency
ii. To develop and communicate core messages
iii. To enable communication between stakeholders and government
iv. To monitor implementation of programmes (e.g. rollout of bulbs) and provide feedback on challenges being experienced and possible solutions.

The membership of the council should be nominated via Nedlac and comprise organised business, government, labour and civil society. The Council should report regularly to both the President and to the Nedlac structures. The Council should meet at least once a month for the rest of this year and then evaluate its work programme.

7. We believe that a pledge, made jointly by all stakeholders, is a useful means of showing our joint commitment to work together to address the electricity emergency. Such a pledge should cover our joint commitments to implement electricity savings, educate our constituents on conservation support a sustainable increase in public-sector power generation capacity, find alternatives to retrenchments and job losses and work in a disciplined, structured way together to address the crisis.

The dispute is directed at:
1. Government as presented by:
a) Department of Minerals and Energy
b) Department of Public Enterprises
c) Department of Trade and Industry
d) National Treasury
e) Department of Provincial and Local Government

2. Eskom
3. National Electricity Regulator of South Africa
4. Business Unity and its respective members
5. Electricity Industry Holdings (EDI)

Patrick Craven (National Spokesperson)
Congress of South African Trade Unions
1-5 Leyds Cnr Biccard Streets
Braamfontein, 2017

P.O. Box 1019
Johannesburg, 2000

Tel: +27 11 339-4911/24
Fax: +27 11 339-5080/6940/ 086 603 9667
Cell: 0828217456

By e-mail.

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