{"id":836325,"date":"2025-08-29T10:14:37","date_gmt":"2025-08-29T08:14:37","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=836325"},"modified":"2025-09-05T13:56:48","modified_gmt":"2025-09-05T11:56:48","slug":"one-step-forward-one-giant-leap-back-for-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/836325\/one-step-forward-one-giant-leap-back-for-south-africa\/","title":{"rendered":"One step forward, one giant leap back\u00a0for South Africa"},"content":{"rendered":"\n

While South Africa is focused on its reform agenda and racking up improvements in the logistics sector, these are coming at the same time that electricity price increases are hitting the country, putting the economy under severe stress.<\/p>\n\n\n\n

South Africa\u2019s economic growth has remained weak for several years, with 2025 expected to see measly growth of around 1%. <\/p>\n\n\n\n

The country has been pushing on a reform agenda focused on energy, logistics, water and improved governance to increase growth. <\/p>\n\n\n\n

According to Roy Havemann from the Bureau of Economic Research (BER), South Africa has taken a significant step in reforming the logistics side after Transnet confirmed that private operators will operate on its network. <\/p>\n\n\n\n

11 private train operating companies (TOCs) have received access to Transnet\u2019s network, marking the first time in decades that private players will run services on the state\u2019s infrastructure. <\/p>\n\n\n\n

The chosen operators met safety, technical and financial requirements and will now negotiate access agreements with Transnet. <\/p>\n\n\n\n

The operators will run services across 41 key routes on six freight corridors, including coal, manganese, iron ore, containers and fuel. <\/p>\n\n\n\n

Collectively, the TOCs are expected to add around 20 million tonnes of freight annually from 2026\/27, helping the government move towards its goal of 250 million tonnes by 2029. <\/p>\n\n\n\n

\u201cThe reform is designed to boost capacity, attract private investment, potentially up to R100 billion, and ease pressure on roads by shifting bulk commodities back to rail,\u201d said Haveman. <\/p>\n\n\n\n

\u201cImportantly, Transnet will retain ownership of the infrastructure, with contracts for private operators lasting between one and ten years.\u201d<\/p>\n\n\n\n

One step back <\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

However, despite the logistics boost, South Africa has received a huge blow after the National Energy Regulator of South Africa (NERSA) admitted to errors that allow Eskom to increase prices. <\/p>\n\n\n\n

Eskom and NERSA reached an out-of-court settlement following Eskom\u2019s judicial review of the Sixth Multi-Year Price Determination (MYPD6). <\/p>\n\n\n\n

NERSA originally approved the following increases and revenues for 2025-2027: <\/p>\n\n\n\n

    \n
  • Approved revenues of R384,610 million for the 2025\/26 financial year, which translates to a percentage increase of 12.74%.<\/li>\n\n\n\n
  • Approved revenues of R409,524 million for the 2026\/27 financial year, which translates to a percentage increase of 5.36%.<\/li>\n\n\n\n
  • Approved revenues of R436 860 million for the 2027\/28 financial year, translating to a percentage increase of 6.19%.<\/li>\n<\/ul>\n\n\n\n

    However, NERSA admitted to errors in its depreciation and asset valuation, which underestimated Eskom\u2019s allowable revenue.<\/p>\n\n\n\n

    The regulator thus agreed that Eskom was entitled to an additional R54 billion across the MYPD6 period. This will result in the following increase: <\/p>\n\n\n\n

      \n
    • For the 2026\/27 FY, the additional increase will be 3.40 percentage points, resulting in a price increase of 8.76%.<\/li>\n\n\n\n
    • For the 2027\/28 FY, the additional increase will be 2.64 percentage points, resulting in a price increase of 8.83%.<\/li>\n<\/ul>\n\n\n\n

      The settlement was finalised in late July and will be implemented without the usual public participation process due to the legal context of the agreement. <\/p>\n\n\n\n

      The increase will not affect the current financial year, as NERSA wished to avoid consumer shocks. Instead, they will increase the price hikes for 2026 and 2026 even further.<\/p>\n\n\n\n

      The increased electricity costs are set to bleed into other costs, and will likely place upward pressure on inflation over the medium term. <\/p>\n\n\n\n

      \u201cElectricity tariffs feed directly into the CPI basket, where administered prices already make up a sizable share,\u201d said Havemann.\u00a0<\/p>\n\n\n\n

      \u201cThe revised hikes of about 8.8% in 2026\/27 and 2027\/28 instead of 5%\u20136% mean electricity will be one of the fastest-rising components of inflation.\u201d <\/p>\n\n\n\n

      The BER\u2019s baseline forecast already had an increase pencilled in that NERSA granted initially, but Havemann noted that broader impacts will come via second-round effects.\u00a0<\/p>\n\n\n\n

      Higher electricity costs are expected to raise operation costs for businesses, especially those in energy-intensive sectors like mining, manufacturing and retail. <\/p>\n\n\n\n

      These costs are then passed on to consumers, amplifying inflationary pressures beyond the direct electricity component. <\/p>\n\n\n\n

      Higher tariffs will reduce disposable income for households, which can impact spending patterns. <\/p>\n\n\n\n

      In macro terms, the settlement may add 0.2\u20130.4%pts to headline inflation in the affected years, depending on how much businesses absorb the cost. <\/p>\n\n\n\n

      For the Reserve Bank, high administered price inflation is one of the key challenges in bringing down inflation to the new 3% target, especially with tariff increases coinciding with food or fuel price shocks. <\/p>\n","protected":false},"excerpt":{"rendered":"

      Despite South Africa’s progress in the logistics sector, the latest blow from Eskom will set the country back, pile on the pressure, and dent the economy. <\/p>\n","protected":false},"author":95,"featured_media":781779,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[17585,1164,2138],"class_list":["post-836325","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-bureau-for-economic-research-ber","tag-eskom","tag-transnet"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836325","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=836325"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836325\/revisions"}],"predecessor-version":[{"id":836961,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836325\/revisions\/836961"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/781779"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=836325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=836325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=836325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}