The electricity price increase granted to Eskom yesterday could cost 250 000 South Africans their jobs, see scores of small business under threat and increase the pressure on already cash-strapped households, analysts have warned.

The National Energy Regulator of South Africa (Nersa) announced yesterday that it had granted Eskom a tariff increase of 24,8 percent for 2010, 25,8 percent for 2011 and 25,9 percent for 2012.

But the SA Chamber of Commerce and Industry (Sacci) said: "Energy constitutes a major input cost for a large proportion of businesses.

"The increase will probably have an adverse impact on investment in production.

"We estimate that about 250 000 jobs will be lost as a consequence, and it will be a factor in CPI (consumer price index) remaining outside the target range."

In Cape Town, local experts said tourism-dependent establishments would have to lower their profit margins, or risk pricing themselves out of the market as a result of the price hikes.

Economist Gerald Wolman, chairman of business and economic affairs at the Cape Chamber of Commerce, told the Cape Argus yesterday that the price increase was likely to lead to an average increase in "all prices" of about 1,2 percent.

And these increases would have a knock-on effect on the tourist industry, with restaurants, hotels, airports and places of entertainment all affected.

While the increase in prices could potentially be offset by a weaker rand, Wolman said he did not think this would be "sufficient to counteract the increase in the price of electricity".

"Because of the global recession, the type of tourist coming now is a package tourist, who looks for the cheapest hotels," Wolman said.

"To them an increase is a serious thing... That type of tourist, if you put up prices, it could cause them not to come to South Africa," he said.

Wolman advised that the wise thing to do would be to sacrifice profit margins to avoid losing business.

Businesses at the lower end of the market would be particularly vulnerable, Wolman said, as they would not be able to increase their prices to compensate for the electricity price hikes.

The standard price of electricity will rise to 41,57 c/kWh (cents per kilowatt hour) when the first increase is implemented this year. By 2012, electricity will cost 65,85 c/kWh.

However, the real cost to Capetonians will only be known once the city council has calculated the effect of the price increase on its tariffs.

Ian Neilson, the deputy mayor and mayco member for finance, said the city would release the information once it had had time to fully understand the Nersa decision and model the data.

He said the headline Eskom increase was usually not the same as that charged to local government and it was necessary to do "a thorough analysis" before responding.

Municipalities have until April 30 to apply to Nersa for approval for the increases they plan to charge their own customers from July 1.

But Nersa recommended yesterday that municipalities charge an extra 15 percent for 2010/11, then 16 percent for each of the next two years.

The acting director of the chamber, Albert Schuitmaker, said he hoped the city would come up with a tariff structure that encouraged commerce and even domestic consumers to use electricity more efficiently.

"We need incentives be-cause it is sometimes necessary to invest in equipment to make more 'load shifting' possible," Schuitmaker said.

The SACP said the increases were the result of the "blunders of the elite" and the government's dismissal of "well-timed and considered advice" to invest in infrastructure.

Cosatu said the increases would cause inflation to rise, jeopardising the chances of recovery from the recession.

"Jobs could be lost, fewer new jobs will be created and many firms may even be forced to close down," the union said, while also threatening strike action.

The ANC was the lone voice in praising Nersa for "applying its mind".

It said the nation had "the duty and responsibility to ensure security of supply as an investment in sustainable economic growth into the future".

By Sapa & Staff Reporters

www.iol.co.za