GOVT’S E50M DEBT CONTRIBUTES TO EEC TARIFF HIKES

MBABANE – As government fails to pay its electricity bill, which is in excess of E50 million, consumers suffer the most as they tend to pay for it through tariff increments.

The proposed electricity tariff hike has spotlighted a significant revenue loss issue, impacting consumers, as government fails to pay its over E50 million bill. As the threat to have the value of electricity units depreciate due to a proposed electricity tariff hike of 25.51 per cent and 27.06 per cent in the two upcoming financial years, this publication has established that not only does government still have post-paid metres, but it also fails to service the accrued debt.

As such, this burden is then shifted to the ordinary citizen, through proposed electricity tariffs hikes, which, according to the proposal made by the Eswatini Electricity Company (EEC), are to, among other things, set to rehabilitate and maintain power stations in a quest to ensure a steady grid.
EEC is a Category A state-owned enterprise in terms of the Public Enterprise Control and Monitoring Act No.8 of 1989, wholly-owned by the Eswatini Government. It is regulated under licences granted by the Eswatini Regualtory Authority (ESERA) to generate, transmit and distribute electricity in terms of the Electricity Act 2007.

EEC generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers. It also imports electricity from the Southern African Development Community (SADC). Government ministries and parastatals owe EEC varying amounts and at different instances, the utility has disconnected the entities; however, it is later restored without the debt being fully settled. This is against the backdrop of the EEC having reported in its annual report that it had recorded a negative operating profit for the financial year ended March 31, 2024; a situation that is not desired.

The profits, when scrutinising the EEC financial reports, have been trending downwards over the past five years, mainly due to the cumulative effect of adverse tariff decisions. The utility reported that while absorbing very high increases from electricity import tariffs, it was granted an average tariff increase of 9.08 per cent for the financial years 2023/24 and 2024/25.

As this is happening, it was said the implementation of a positive tariff would enable the company to slowly recover from a difficult period of stagnant revenue, which is against rising input costs. In the past year, the major supplier of EEC increased its tariff by 19.15 per cent, resulting in the cost of sales for the year being E2 525 million (2023: E2 178 million).

Weather

The company reported that other cost of sales, excluding power purchase, increased by E48 million (6.8 per cent), due to increased maintenance costs on the supply network infrastructure, exacerbated by the global warming effects on weather patterns. The maintenance of the utility’s plant could have been covered by the amount of money owed to it by government. It is worth noting that imports make up a large share of electricity consumed in the country, as conservative estimates suggest that Eswatini imports about 70 per cent - 80 per cent of its energy supply from South Africa’s Eskom and Mozambique’s Electricidade de Moçambique, while other approximations place imports from South Africa alone at up to 90 per cent.

Electricity remains one of the most imported products  in the country and to address the over-reliance on imports and ensure a more sustainable energy future, there is a move by the Ministry of Natural Resources and Energy to accelerate renewable energy generation. The Energy Masterplan 2034, details that Eswatini aims to have a 50 per cent share of renewable energy in the national energy mix by 2030, to be met primarily through the adoption of biomass, hydro, solar and wind energy technologies.

The country’s Independent Power Producer Policy, adopted in 2016, aims for greater private-sector participation in the electricity sector and this was emphasised by EECs Managing Director Ernest Mkhonta, during the 2024 Standard Bank Eswatini Energy Indaba, where he indicated that the national power utility is eager to collaborate with independent power producers to increase domestic power generation, including by bringing them online to the national electricity grid.

Meanwhile, according to the tariff review proposal, EEC seeks the regulator to consider a total of approximately E11.6625 million as net over-recovery to be deducted in the upcoming years’ tariffs. The proposal is to spread these recoveries over the two-year application period as part of the revenue requirement. It is worth noting that the under-recovery from the past two years is offset by the over-recovery from previous tariff applications. The utility mentioned through its proposal that currently, electricity prices do not cover the full costs of supplying electricity across the various tariff categories.

It was said the tariff upward review continued the migration to cost-reflective tariffs. The company said it recognises the impact of tariff increases on the economy and households, especially the small businesses and the indigent customers. It said this tariff proposal considers the adoption of the subsidy framework by legislators, which includes an inclining block tariff for the company’s lifeline customers, who are considered to be low-income consumers.

Businesses

Despite this, an economist said the proposed tariff hikes, if implemented, could have far-reaching consequences for Eswatini’s economy.  He said businesses, particularly small and medium-sized enterprises (SMEs), may struggle to absorb the increased costs, leading to job losses and reduced economic activity. Additionally, he said consumers, especially low-income households, may face significant financial strain.

The economist said: “It is unfortunate that the threat facing the masses tends to be politicised, while it is neglected that the failure to pay arrears by government has adverse impact on the maintenance of a sound grid. If this is not dealt with, it could lead to a collapsed grid like in South Africa.” To mitigate the impact of tariff hikes on vulnerable consumers, the economics scholar said, government could consider implementing targeted subsidies or social safety nets.

Moreover, he said ESERA should carefully scrutinise the proposed increases and ensure that they are justified and in the best interest of consumers. Also, EEC’s Marketing and Communications Manager Khaya Mavuso confirmed that there are entities owing them substantial amounts. However, he requested not to comment much on the issue as he said it was being dealt with by the utility and its customers.
Meanwhile, despite the looming threat to the national electricity grid and government’s failure to settle its outstanding debt to EEC, Prime Minister (PM) Russell Dlamini has publicly opposed the proposed 25.51 per cent electricity tariff hike.

The premier expressed his concerns during a parliamentary debate, highlighting that the proposed increase is unjustified, especially considering the current economic climate and high inflation rates. He urged citizens to actively engage with relevant authorities and question the rationale behind the proposed hike. The government’s stance has been met with approval from Members of Parliament, who share similar concerns about the potential impact of the tariff hike on the struggling economy.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: