Two big wins for South Africa, but a huge loss for electricity prices
South Africa has made progress in its labour market and logistics reforms, but is still facing major issues in the energy sector.
The Bureau of Economic Research’s Roy Havemann and Julia Iles said that South Africa has progressed in its labour market reform following the publication of the final Code of Good Practice on Dismissal.
The code considers the challenges faced by small businesses, especially when complying with formal procedures may be impractical.
“This is a welcome move in an area that has fallen off the reform radar. There has, however, been little progress on implementing the other labour market reforms agreed by NEDLAC,” said the experts.
Looking elsewhere, South Africa’s logistics space is also progressing following years of extreme mismanagement along the nation’s ports and rails.
Data from August showed that South Africa handled close to 19,000 twenty-foot equivalent units (TEUs) daily, the highest daily volume since the pandemic.
The South African Association of Freight Forwarders (SAAFF) said this is a turning point following two difficult years.
The SAAFF credited new equipment, revised processes, and industry-wide collaboration for the improvement at the ports
“Despite this progress, the sector still faces significant challenges, including ageing infrastructure, limited handling capacity, recurring delays, and rising costs,” said Havemann and Iles.
Electricity problems remain
South Africa is making little progress in the energy front, with massive price hikes incoming for South Africa following a R54 billion mistake by the National Energy Regulator of South Africa (NERSA).
Eskom and NERSA reached an out-of-court settlement following Eskom’s judicial review of the Sixth Multi-Year Price Determination (MYPD6), with NERSA initially approving the following increases:
- Approved revenues of R384,610 million for the 2025/26 financial year, which translates to a percentage increase of 12.74%.
- Approved revenues of R409,524 million for the 2026/27 financial year, which translates to a percentage increase of 5.36%.
- Approved revenues of R436 860 million for the 2027/28 financial year, translating to a percentage increase of 6.19%.
However, NERSA admitted that it made errors in its depreciation and asset valuation calculations, which underestimated Eskom’s allowable revenue.
The regulator agreed to grant that Eskom was entitled to an additional R54 billion across the MYPD6 period, with the following increases now pencilled in:
- For the 2026/27 FY, the additional increase will be 3.40 percentage points, resulting in a price increase of 8.76%.
- For the 2027/28 FY, the additional increase will be 2.64 percentage points, resulting in a price increase of 8.83%.
The settlement was finalised in late July and does not require a public participation process.
NERSA said the increases will not be felt in the current financial year, as it looks to avoid consumer shocks.
The fallout from the mistake has already started, with one NERSA official suspended for the mistake.
Minister of Electricity and Energy, Kgosientsho Ramokgopa, has, however, promised reforms to simplify the electricity tariff setting process.
“This would be welcome as NERSA has faced years of legal battles with Eskom over the price of electricity,” said Havemann and Iles.
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