the matter regarding electricity tariffs is that “at this point, if we wanted to have a cost effective tariff, the only way is to service that core value chain, the only way is to ensure that we are paying and compensating the value chain -from generation down to distribution- a cost effective tariff.”
In a similar vein, the Vice President also made it clear at the meeting that a review of the CBN
restrictions on foreign currency is not imminent.
His words: “I want to make it absolutely clear that
the position is not that a review of the CBN
restrictions on foreign exchange is imminent. It is a
short term measure, not a policy, and as things
improve, we will have a discussion about what to
do. But certainly not that a review is about to take
place.”
He spoke more on the electricity tariffs:
“Power is of course crucial and as the president said
in his inaugural address, to which President Mbeki
referred, the question of power is one that is
absolutely crucial to manufacturing and practically
everything else and we shouldn’t be rejoicing at 4000
Megawatts of power. But the problems are historical
and several of those problems will need tackling
head on, on a day-by-day basis.
“One aspect of the problem that I want to speak
about, because this also affects manufacturing, is the
whole idea of the tariffs. Of course the president of
MAN just said that we have one of the most
expensive electricity in the world.
“Now, the truth of the matter is that at this point, if we wanted to
have a cost effective tariff, the only way is to service that core value
chain, the only way is to ensure that we are paying and compensating
the value chain -from generation down to distribution- a cost effective
tariff.
You cannot have that cost effective tariff without some pay. At the
moment, (when you compare) how much it costs to produce power,
and the amount of power that is generated, the losses on account of
distribution are significant. In some cases you have up to 40% losses
in distribution, and of course it is the DisCos that have to take that
burden.
“The GenCos (generating companies) are producing power but they
expect to be paid for all the power that they produce. Now, if 40% of
this is lost, it means the DisCos cannot collect 40%, but they have to
pay for it somehow. So government has to come in and play some
kind of role in order to ensure that the whole value chain is paid for.
“But the most important thing is that the cost of power is reflective of
costs that have to be borrowed at every stage of the value chain and
today the cost of power, if it’s going to be reflective in any way is
simply what it is. It will be very difficult indeed, except if we are
going introduce yet another subsidy and by the way, a fair amount of
that goes on already in the way that government supports the GenCos
and the DisCos.
“But I think that we must be ready to accept that for a while, until
things stabilize somewhat, tariffs cannot remain at the levels at which
they are today, they cannot remain at that level, and that just simply is
the truth of the matter.
“It certainly means that there may be higher costs, but I don’t think
that an option of not having power is really what we want. The real
issue of course is that at the end of the day, some of the cost goes to
the consumer, but a cost reflective tariff is an absolute necessity,
otherwise, privatization and all of that simply doesn’t make sense.”
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