News in South Africa 14th June:
1. Electricity tariff increase:
Residents of six municipalities that want consumers to pay even bigger increases in electricity tariffs than the 15.1% that the National Energy Regulator of South Africa (Nersa) deems appropriate will get the opportunity to express their views on the matter on Thursday.
Nersa recently published its annual guideline and benchmarks for the increase in municipal electricity tariffs that kick in on July 1. This has drawn strong criticism from the Association of South African Chambers (ASAC) for its failure to approve wheeling tariffs for municipalities.
This is the last year the regulator will be allowed to use this methodology, after two court rulings last year found it unlawful. Nersa was given until 2024 to develop and implement a new methodology, based on the cost of supply in each municipality, in line with legislation. It is still to publish such new methodology for public comment.
The publication of the guideline has paved the way for Nersa to process municipal tariff applications individually and it has indicated that public hearings will be held only for those municipalities that apply for increases exceeding the guideline.
Six municipalities, including two metros, have applied for increases that vary between 16% and 21.49%. These are listed in the table below.
The Swartland Municipality cites reduced sales (due to load shedding) as the reason it needs extraordinary increases. The City of Cape Town and eThekwini Municipality blame lower sales, while eThekwini also says its expenses increased due to the July 2021 riots and April 2022 floods.
Nersa said it would only approve increases above the guideline if applications were accompanied by a cost-of-supply study. The additional revenue must also be ring-fenced for specific projects.
The regulator further repeated its position that it has no mandate to regulate small-scale embedded generations (SSEG) and would therefore not approve such tariffs.
2. NHI bill passed:
South Africa’s National Assembly approved a new law that will pave the way for the introduction of universal health insurance, a plan its critics argue will be financially unsustainable and impossible to implement effectively.
The National Health Insurance Bill aims to ensure all South Africans have access to quality healthcare services and provides for the establishment of a fund that will be used to pay for almost all medical treatment from accredited providers, with rates to be determined by the state.
Private insurers will only be able to pay for products and services that aren’t covered by the fund.
The 16% of the population who have private medical insurance account for 51% of national expenditure on medical treatment, while the balance of the money is spent on the other 84% of the population who rely solely on the public health system, Health Minister Joe Phaahla told lawmakers on Tuesday (13 June) during a debate on the bill.
“This has led to a situation where the public health system is under tremendous pressure, while the private health care is over-servicing its clients, leading to ever-rising costs,” he said.
Money for the new fund will come from general tax revenue, payroll taxes, surcharges on personal income tax and the reallocation of funding for tax credits that are currently paid to private insurers, according to the bill.
3. Rise in cybercrime:
The rise in cybersecurity breaches was blamed on a combination of lax security measures at companies and more sophisticated hackers.
The country’s 2023 State of Ransomware report pointed to alarming data, with claims that many organisations were hit by ransomware attacks in 2022.
Ransomware involves a company needing to pay criminals to release their data and systems after hacking them.
“The primary attacks are in two separate areas. You’ve got complex attacks, which means it’s ever engaging, ever-evolving, and you’ve got the secondary area, which is more of the criminal act,” said technology expert Brandon Muller.
“Now, the criminal act is what we’re talking about here, and in the criminal act, its primary purpose is financial gain, if you’re looking at it from a cybercriminal perspective.”
Muller admitted it was becoming harder to thwart these attacks.
“This is also due to the fact of the inflation that we see. Organisations are feeling the pinch, at the moment. So, it’s necessary to involve the right expertise but also the organisation needs to be mindful of the cost of these expenditures. At the end of the day, it might be more expensive to build up your own in-house security architecture.”
4. Real reasons for lower loadshedding:
Energy analyst Chris Yelland said there are good reasons South Africa has been experiencing lower levels of load-shedding, despite earlier warnings of a dark winter.
Acting Eskom CEO Calib Cassim recently warned that the country faces a “difficult winter” as it heads into the cold months, with 3,000MW less capacity than last year.
Energy expert Clyde Mallinson said Eskom faces an 11,000MW electricity shortfall during winter, which would result in 2,000MW load-curtailment and stage 9 load-shedding.
Electricity Minister Kgosientsho Ramokgopa has warned of a dark winter ahead, saying Eskom faces a shortfall of 8,000MW to 10,000MW in winter. This equates to stage 10 load-shedding.
However, Yelland said that while Eskom still faces a shortfall, the country will have a more reliable experience in these next three months compared to the past three months.
This is because the electricity supply in winter is far more than some may think, and demand is far lower for some projects.
He said there are four main reasons why South Africa could avoid a dark winter.
- Maintenance is performed in summer.
- Lower maintenance in winter and air-cooling power stations.
- Renewable energy.
- Decreased industrial demand.
5. US consumer price increases slow:
US consumer prices barely rose in May and the annual increase in inflation was the smallest in more than two years, though underlying price pressures remained strong, supporting the view that the Federal Reserve would keep interest rates unchanged on Wednesday while adopting a hawkish posture.
The smaller-than-expected rise in the Consumer Price Index, reported by the Labor Department on Tuesday, reflected decreases in the costs of energy products and services, including gasoline and electricity. But rents remained sticky and prices of used cars and trucks rose further. The report was published as Fed officials began a two-day policy meeting.
“The moderate slowing provides the Fed room to pause its rate hikes this week,” said Kathy Bostjancic, chief economist at Nationwide in New York. “However, if economic data continues to surprise to the upside and inflation remains sticky, the door is open for another rate hike in the coming months, as soon as July.”
The CPI increased 0.1% last month after gaining 0.4% in April. Gasoline prices dropped 5.6%, while electricity declined for a third straight month. Utility gas also cost less.
But food prices rose 0.2% after being unchanged for two consecutive months as fruits and vegetables, nonalcoholic beverages and other food products became more expensive. Meat and fish, however, were cheaper, while egg prices fell 13.8%, the most since January 1951. It cost more to dine out.
In the 12 months through May, the CPI climbed 4.0%. That was the smallest year-on-year increase since March 2021 and followed a 4.9% rise in April.
The annual CPI peaked at 9.1% in June 2022, which was the biggest increase since November 1981, and is subsiding as last year’s large rises drop out of the calculation.
Economists polled by Reuters had forecast the CPI would gain 0.2% last month and increase 4.1% on a year-on-year basis.
All information sourced from articles posted by: Moneyweb, BusinessTech, EWN, DailyInvestor, and Fin24.
