South Africa Energy Market Report - February 2017



Electricity:

The South African Renewable Energy Council (Sarec) has welcomed the continuation of South Africa’s independent power producer (IPP) programme which is imperative given the need to boost investment in the short term. Eskom will need to conclude the outstanding power purchase agreements (PPAs) with IPPs accordingly in order to meet their targets. With 35% of the labour force unemployed, economic growth in the doldrums and poverty concentrated in townships and rural areas, South Africa’s renewable power programme is well-placed to drive the economy forward. The Department of Energy reported that the renewables programme has, to date, brought in $14-billion of foreign economic direct investment and created over 20,000 construction and 35,000 operational jobs.

The National Energy Regulator of South Africa (NERSA) has allowed State-owned Eskom to raise its tariffs by 2.2% for the 2017/18 year. Eskom’s price increase comes into effect on 1 April 2017. All electricity users countrywide are set to benefit from this significantly reduced electricity price increase. End-consumers need to keep in mind though that Municipal resellers could still push price increases higher than Eskom’s approved 2.2% to align with inflation. Municipal price increases come into effect on 1 July 2017 - proposed pricing for Resellers and Local Authorities have yet to be presented to NERSA and approved. Taken that many Municipalities are indebted to Eskom, their increases may well be equal to the inflation percentage.

Petroleum:

The fuel prices for March 2017 will be adjusted as follows:

1. Petrol (both 93 & 95 - ULP and LRP): 8 c/l decrease;

2. Diesel (0.05% and 0.005% Sulphur): 2 c/l decrease;

3. Wholesale price of Illuminating Paraffin: 8 c/l decrease;

4. SMNRP of Illuminating Paraffin: 10 c/l decrease; and

5. Maximum Retail Price of LPGas: 2 c/kg decrease.

Carbon:

During the 2017 budget speech it was announced that the revised Carbon Tax Bill will be published for public consultation and tabling in Parliament by mid-2017. The Draft Carbon Tax Bill, initially published by National Treasury in November 2015 for public comment proposed that companies would be taxed from January 2017, with each tax period running for a full calendar year and due six months following the close of a company’s financial year-end. A carbon tax rate of R120/t of CO2-e emissions would be applied in the first four-year phase up to 2020, with various tax-free thresholds of between 60% and 95% of total emissions, reducing the effective carbon tax rate to between R 6/t and R 38/t of CO2-e. This implied that the carbon tax would be imposed on only 5% to 40% of actual emissions up to 2020, as a developing country - South Africa was the first to commit to carbon reductions - committed to reduce greenhouse-gas emissions by 34% below business as usual levels by 2020 and by 42% by 2025. The draft Bill would be revised, taking into account public comments and further consultation before being tabled with Parliament for approval. The carbon tax is expected to implement complementary measures, such as a reduction in the electricity levy and other measures, to recycle revenue, lessening its impacts on business.

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