Free State goldfields business representatives, centred in Welkom, have painted a horrifying picture of the effect massive energy costs have had already on the area with one major investor, Galison Manufacturing, looking at relocating its business to Zambia because doing business was proving to be unprofitable.
Schalk van der Merwe of the goldfields Chamber of Commerce told the trade and industry committee that much of the blame could be laid at the door of the Matjhabeng municipality. He said Galison had been serving the local mines since 1977.
“It is one of the major manufacturers of heavy metal fabrication and metal objects,” he told MPs. It employed 250 people and utilised 24 overhead cranes. “It is quite a large set up.” Galison exported to Zambia, Ghana, Tanzania, Botswana and Zimbabwe, as well as to Austria and Russia.
The committee was told last Friday that Galison worked on long-term contracts with the mining sector, which involved fixed prices.
Sudden massive rises in input costs – like electricity – removed any possibility of proper planning.
The hearings have focused on the detrimental impact of Eskom power price hikes coupled with massive mark-ups for electricity distribution by municipalities. About half of the 283 municipalities in South Africa provide electricity to industrial consumers.
Van der Merwe said the company was “on record” as saying that it would move its operations to Zambia, “as it is more effective to do [its business] from there”. “This would simply mean that 250 jobs would be lost in the area.”
Galison’s electricity account had been R90 000 in June this year. It had jumped to R130 000 in August.
“They had to absorb that cost without any forewarning from the municipality,” he said.
Mirna de Hart, the Free State Chamber of Commerce president, said the municipality was hampered by a “lack of capacity”. The municipality, for example, did not have a chief financial officer or an engineer. Water supplies were regularly cut off by Sedibeng Water, she reported. This was not an environment conducive to retaining or growing business.
Van der Merwe reported that there had been “bundles of correspondence” with the municipality on the issue of price rises for services. “In response we received just one page.”
The response to complaints about the hike in electricity – from 51c per kilowatt-hour (kWh) to 62c/kWh – was that businesses would simply have to live with it.
Committee chairwoman Joan Fubbs said that there was no point in laying the blame at the door of municipalities. “If we are only to lay the blame [with] the municipality… we are not going to get anywhere fast,” she said.
Her ANC colleague, Sue van der Merwe, suggested that “a colloquium” be called of interested parties to find ways of resolving the problems facing businesses. “We want industry and manufacturing… but (they) are in fact closing down.”