National Energy Regulator of South Africa

Transcription

1 National Energy Regulator of South Africa Proposed Eskom Electricity Price increase of 35% per annum for three years JJ Murray

2 The South African sugar can industry I N HLA N GA N O Y EBA LI MI BEMOBA

3 MAP OF MPUMALANGA SUGAR INDUSTRY White River Nelspruit Barberton Mountainview Dam Kaap River Lomati River Kruger National Park Malelane Kaapmuiden Malelane Mill SWAZILAND Maguga Dam Lake Matsamo Hectorspruit NKOMAZI Komati River Crocodile River Naa s Komatipoort Komati River Komati Mill MOZAMBIQUE Legend Roads Rivers Railway Int Border Komati Mill Cane Malelane Mill Cane Thembalethu Home Based Care - Current Service Footprint

4 The South African sugar industry Sugar Cane farmers dependants tons of sugar cane and roughly t of sugar annually. Market 60% locally and the remaining 40% is exported making the industry a significant earner of foreign exchange. The crop is produced off ha of arable land with 24% of the area reliant on supplementary irrigation ha farmed by Small Scale Growers. Direct employment amounts to people with indirect employment estimated at people in a predominately rural environment.

5 The Mpumalanga sugar Industry Two sugar mills supplied by 1360 farmers producing a crop off ha under irrigation of these farmers are Small Scale Growers producing off ha. Mpumalanga produces roughly t of sugar cane and t of raw and refined sugar. The industry supports both direct and indirect employment and a number of associated industries including: cane cutting and transport fertilizer and chemical supply and application, Farm supply Animal feed and fuel companies

6 Relative Cost proportions I N HLA N GA N O Y EBA LI MI BEMOBA

7 Comparative Indices I N HLA N GA N O Y EBA LI MI BEMOBA

8 Response to tariff increases: Scenario 1 I N HLA N GA N O Y EBA LI MI BEMOBA

9 Response to tariff increases: Scenario 2 I N HLA N GA N O Y EBA LI MI BEMOBA

10 Response to tariff increases: Scenario 3 I N HLA N GA N O Y EBA LI MI BEMOBA

11 Small Scale Growers Mpumalanga has 1350 Small Scale Growers producing roughly t off ha. These SSG s s are marginal producers and MpCGA and Tsb Sugar Ltd have initiated a project to address their sustainability. Employed a full time consultant to project manage (Booker Tate) Raised over R6 mil grants for seed cane schemes and social facilitation itation Raised over R12 mil grants for rehabilitation of irrigation infrastructure Started our own bank (Akwandze Agricultural Finance R100m) to finance this sector. SSG are already failing to keep up with the tariff hikes. The proposed tariff increases will result in the failure of this entire initiative and the collapse of the sector.

12 Results of Tariff increase Average electricity costs range between R1500 R2000/ha. The proposed increases will raise costs to R4950/ha. Income projections cannot keep up with cost increases. Growers can make changes to mitigate increases Increase volumes pumped during off peak times - soil types capital requirements Reduce irrigation crop stress and loss of revenue Adapt irrigation infrastructure - bigger volume pumps and drip irrigation

13 Results of Tariff increase (cont) Cane Supply will be affected. Without significant funds for capital improvements economic growth in the sector will be affected. Small Scale Growers will be severely affected by the increase in tariff. Milling companies may re evaluate their investment in milling capacity as their ROI decreases. The closure of a mill would be disastrous in this rural area. The proposed increases impact on the sustainability of the industry

14 Conclusion 35% Eskom tariff hikes over three years will: Reduce farmers returns to unsustainable levels Ensure the collapse of the 1350 Small Scale Farmers in the Nkomazi who farming ha. Mill and supplementary services sustainability With a reduction in cane supply one sugar mill will become marginal. Demand for supplementary services will decline Job losses and a decline into poverty result as one of the only opportunities to rise above poverty in the Nkomazi region is withdrawn.