The government will set up a task team to investigate how industry can benefit from preferential electricity tariffs in the light of Eskom’s current overcapacity.
Trade and Industry Minister Rob Davies said in Parliament this week that the task team would decide on the agreed criteria to be used to identify and prioritise the industries and Eskom’s direct customers that could receive the preferential support.
"The envisaged support will cover current, brownfield and greenfield investments, prioritised on the basis of number of jobs to be retained and/or created as well as economic multiplier effects within value chains," the minister said in a reply to a parliamentary question by ANC MP Tozama Mantashe.
The task team would also engage with the Treasury, the South African Local Government Association (Salga) and the Department of Co-operative Governance and Traditional Affairs on the determination of electricity tariffs in municipal areas.
"Eskom has recently indicated possible excess electricity capacity, with a further increase once the new power stations come on-stream. The Department of Trade and Industry is currently engaging with the Department of Public Enterprises (as Eskom’s shareholder ministry), the Department of Energy (as a custodian of the electricity pricing policy) as well as Eskom to develop a more comprehensive proposal and a framework on how the impending electricity oversupply can be leveraged to better support the industrial policy as well as the energy-intensive users," Davies said.
He noted that stable electricity supply and competitive pricing played a critical role in determining the competitiveness of the more energy-intensive sectors of the economy such as foundries, which had been in decline. The Department of Trade and Industry was committed to ensuring that the more labour-intensive and value-adding segments of manufacturing sector remained sustainable, competitive and economically viable in the medium and long term.
Davies said the manufacturing industry like most industries in the country was under immense pressure and continued to face challenges that adversely affected its competitiveness and viability. These pressures included the fragile global economy, stiff international competition due to continuous technological improvements and cost-competitiveness.
Domestic structural issues such as subdued demand, inefficient logistics infrastructure and increasing utility costs (including electricity prices) had further dampened the growth and development prospects of key manufacturing industries.
Replying to another question by ANC MP Adrian Williams, the minister highlighted a number of challenges with the government’s localisation programme, in particular the designation of local products for procurement by government and state-owned entities. Key sectors that have been designated include rail rolling stock; power pylons and substation structures; structural steel; conveyancing pipes; steel construction materials; valves; rail signalling; transformers; cables; and furniture and clothing and textiles.
"The main challenge in the implementation of [the] localisation programme across all designated sectors relate to noncompliance by procuring entities which in most instances is fuelled by lack of knowledge and/or misinterpretation of the prevailing National Treasury instruction notes applicable in the procurement. In some cases, there is a level of misrespresentation by the bidders in the declaration of the local content," Davies said.
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