The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

South Africa: Local governments to shoulder energy-price spikes

Electricity price rise adds to budgetary burdens; Might hit those least able to afford increases

As excitement gathers before this summer’s football World Cup in South Africa, financial pressure on the host nation is also growing, especially at municipal-government level.

South Africa’s National Energy Regulator (Nersa) has allowed state-owned electricity generator Eskom to charge municipalities higher energy rates. Eskom electricity prices for municipalities will be permitted to rise on average by about 25% a year from April 1 2010 until March 31 2013.

The extra money will help Eskom build more power stations and plug South Africa’s energy shortage. But the issue is socially sensitive, even though electricity prices in South Africa are still relatively low, despite previous Eskom price increases in recent years.

Municipal governments distribute electricity to most South African households and small businesses. This year, the regulator has issued guidelines to municipalities on how much they can pass on Eskom’s price increases.

In the past, municipalities have used income gained from energy sales to cover the cost of less profitable public services. According to a recent report on the municipalities by Moody’s Investors Service, electricity sales bring 30% of municipalities’ revenue but electricity purchases only account for 20% of their spending.

Nersa says municipalities that implemented price increases to end users in line with Eskom’s 30% price increases in the 2009/10 financial year should only implement new price increases of about 15% on average a year for the next three years.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree