It seems like there is a lot going around in the news these days. If it’s not Zimbabwe then it’s the rising interest rates, or the electricity situation. Funny enough Jacob Zuma has not been making the headlines lately! Today I am going to talk about the electricity problems being faced in South Africa. Should the electricity tariffs be allowed to go up by over 50% or should be be content with blackouts for the foreseeable future?

Eskom are still pressing for a 50% increase in the electricity tariffs. This proposition has not been welcomed by many across South Africa from COSATU to the Central Bank. It is understandable why many do not want to see such a huge increase in the price of electricity. For starters the inflation rate would sky rocket as rising electricity prices would mean that the price of virtually everything else will go up. Many people would be unable to afford paying for electricity together with food. If electricity goes up, inflation goes up, interest rates go up. It is just one long messy cycle which would just make life harder for the majority of South Africans.

But on the other hand, if the electricity price in not increased, Eskom will not have any money to finance their expansion which is meant to help alleviate the current electricity crisis. This would mean that we would continue to experience load shedding and blackouts across the country. Is there another way Eskom can finance their expansion without increasing the tariffs? Maybe not.

Let’s look at it this way, South Africa still has some of the cheapest electricity in the world. A kilowatt costs R0.22. In the USA, a kilowatt costs US$0.10 which is about R0.80. Now if you compare the R0.22 in South Africa with the R0.80 in the USA you can see that there is a big difference in price and South Africa still has very cheap electricity compared to the rest of the world and surely there is no way Eskom can sustain its operations without increasing prices. Just thinking of it, South Africa has some of the highest telecom rates in the world yet they have some of the cheapest electricity in the world. It is a tale of two extremes.

The scenario at hand is: if we say no to the increase in tariffs we are potentially going to continue having more blackouts and load shedding as Eskom will just not have the ability to get their house in order and finance the development of new infrastructure. Or if the increase goes ahead, we may help solve the electricity problem but even after the increase, we will not immediately see load shedding and blackouts disappear as it will take Eskom a while to build the infrastructure necessary to generate more electricity. But during that time we will be suffering due to the price of everything going up due to the increased tariffs. So it looks like an increase in tariffs by Eskom seems like a more long term solution to the electricity problems we face. If the increase doesn’t go ahead we maybe doomed in darkness forever. To increase or not to increase? That is the question.