The proposed 20.67 per cent electricity tariff increase by the Eswatini Electricity Company (EEC) is a tough pill to swallow for everyone.
Minister of Finance Neal Rijkenberg noted that electricity was used by all citizens and that everyone would ultimately be subjected to the increase.
He unpacked the budget process, explained the importance of pro-rata allocations, discussed value-added tax (VAT) taxation and addressed the electricity tariff increase during the Finance in Focus yesterday.
The minister said the double-digit increase was brutal at household level, noting that the increase was driven by external factors, not government decisions.
He questioned whether government could have done more to produce power locally, adding that for the longest time, the cost of producing electricity locally exceeded the cost of importing it.
Rijkenberg added that the balance had shifted over the past few years due to an aggressive increase in the cost of imported power, making it more sensible for the country to generate more electricity locally.
“You will see a lot of power purchase agreements (PPAs) being issued by government. Unfortunately, we did not want to increase the price earlier, hence importing. With that price increasing, it is not really in government’s hands to control as it is really the external forces,” he said.
Rijkenberg questioned whether government should subsidise electricity prices for Emaswati, urging citizens to consider where such subsidies would come from.
“The money does not fall out of the sky, but comes from the taxpayer,” he said.
He added that using taxpayers’ money to subsidise electricity prices would be principally wrong, emphasising the user-pays principle, where individuals pay for what they consume.
The minister advised the nation to reduce electricity consumption.
He noted that subsidising electricity prices would either result in reduced government service delivery or higher taxes to fund the subsidy.
Rijkenberg acknowledged that the issue was thorny and painful, but said the issued PPAs were meant to ensure cheaper, locally produced power in the long term.
He highlighted that the current pricing structure meant businesses paid more, while domestic households paid less, warning that rising prices could force some businesses to close.
“We have the regulator for that. The pressure has to come from somewhere and the pressure will build up,” he said.
He stressed the importance of ensuring that EEC survives financially, noting that the utility was currently struggling.
“With their financials not looking good, we are battling to put the PPAs in place because investors question EEC’s balance sheet and ability to manage their money,” he said.
He added that the lack of funds created a vicious cycle where insufficient revenue hindered local power production.
The minister urged stakeholders to engage fully in consultation processes and to continue reducing electricity usage where possible.
“Ultimately, we are in a tough position where we are going to have to bite the bullet in a certain way to get ourselves as a country independent in power,” he said.
Rijkenberg stated that once Eswatini achieved energy independence, electricity prices would theoretically only be affected by the consumer price index (CPI), rather than external factors currently influencing annual increases.
