South Africa power price surge leads to strike threats


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BAK

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Joined Feb 11, 2007
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South Africa power price surge leads to strike threats


By Russell Padmore
Business reporter, BBC World Service
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Eskom has struggled to meet demand for electricity in South Africa

South African trade unions are threatening strikes after the country's government allowed state-owned power firm Eskom to raise prices by 24.8%. Both consumers and businesses will struggle with significantly higher electricity bills, unions argue.
The Johannesburg Chamber of Commerce and Industry said firms were already struggling to cope with the fallout of recession and slow economic recovery.
The extra expense and risk of strikes were a "double whammy", it added.
"In this climate, with the economy where it is, obviously it has a huge impact, it is not good for recovery," the group's president, Mark Nowitz, told the BBC.
Job loss fears
Patrick Craven from the Congress of South African Trade Unions (COSATU) said he was worried that extra costs from higher electricity prices would deter firms from taking on more staff.
"Many businesses, which are struggling to survive, will not be able to afford such a massive increase. Jobs could be lost, fewer new jobs will be created and many firms may even be forced to close down," he said.

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I'm afraid this increase of around 25% in electricity prices is going to have quite a significant impact on the South African economy
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Dawie Roodt
Chief economist, Efficient Group

Figures released earlier this week showed that South Africa's economy grew at an annualised rate of 3.2 % in the fourth quarter, helped by a strong rise of 10% for the manufacturing sector.
But there are fears that the prospect of a big jump in power prices could dent that growth.
Dawie Roodt, chief economist with Efficient Group, an asset management firm in Pretoria, told the BBC the country's economy remained quite fragile.
"I'm afraid this increase of around 25% in electricity prices is going to have quite a significant impact on the South African economy," he said.
"Some sectors, for example manufacturing and most definitely the mining industry, will be quite hard hit by this huge increase in electricity prices."
Rise expected
A big increase in power prices has been on the cards for some time as the state-owned generator has failed to meet the growing demand for electricity.
Eskom, which provides more than 90% of the country's electricity, needs fresh funds to build more power stations.
In recent years power rationing has caused shortages or blackouts which have been especially troubling for South Africa's mining industry - the big driver of the country's economy.
Eskom wanted permission to increase power prices by 35%.
The government settling below that level will ease some of the Reserve Bank of South Africa's short-term concerns about inflation.
However Eskom has also been permitted to increase electricity prices by a further 25% next year and again in 2012.
 

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