By Phiwa Sikhondze
During this week’s episode of “Finance in Focus,” the Minister of Finance Neal Rijkenberg addressed the nation, highlighting the unavoidable increase in electricity costs that emaSwati will face.
The Managing Director of the Eswatini Electricity Company (EEC), Ernest Mkhonta recently revealed that the country has secured 10 more years of imported power supply through the extension of its contract with South Africa’s Eskom. Rijkenberg has, however, warned that electricity prices will rise significantly impacting both households and businesses.
He said this will be likely caused by the fact that Eskom might increase the electricity cost by 30-35%, leaving the EEC with no alternative but to increase prices for the end user.
The Minister added that the EEC must be commended for managing to keep prices relatively low over the past few years, which has however, come at the cost of dwindling profits.
As a result, the EEC has been absorbing higher costs from Eskom, which has led to a precarious financial situation for the company.
“While overall inflation in Eswatini has been decreasing, currently standing at 4.2% compared to 5.4% in 2023, the cost of electricity remains a critical concern. Over the past few years, the EEC has implemented minimal increases in electricity tariffs to shield consumers from the full impact of rising costs. For instance, there were periods when the tariff increase was as low as 3%, and for two years, there was no increase at all.”
“The EEC’s profits have dwindled over the last five years. They used to make almost half a billion Emalangeni in profit at some stage, but by not passing the full cost through, they have been taking a lot of that internally,” Rijkenberg explained. “As they are now, unfortunately, they are kind of on almost zero profit territory, which is a little bit dangerous because if any shocks come, they need to pass the shocks straight through to the end user at this stage.”
The Minister noted that the anticipated increase in electricity costs is expected to have a broad impact on both households and businesses.
He said higher electricity prices will likely lead to increased costs for goods and services, contributing to inflationary pressures. For households, this means higher utility bills, which could strain budgets and reduce disposable income.
Rijkenberg urged residents to adopt energy-saving measures to mitigate the impact of the expected price hikes.
“Practical steps such as using energy-efficient appliances, installing timers and blankets on geysers, and considering solar geysers can help manage electricity bills more effectively,” he advised. “Electricity is one of those things that one can manage and try to reduce. For instance, a geyser uses a lot of electricity, so putting timers on the geysers or using solar geysers can make a significant difference.”Rijkenberg further assured emaSwati that the government is exploring various strategies to manage the cost increase and minimize its impact on the economy.
“We will see what we can do as a government to try to manage that cost and maybe try to phase it in, really trying to help that it doesn’t have a devastating impact on the economy.”
“Even though inflation overall might be okay going forward, electricity costs are going to probably have a certain dynamic to them which might be difficult to absorb for the man on the street,” Rijkenberg noted.