The impact of increasing electricity tariffs on the automative industry in South Africa

• Main Author: Hoops, Eduard Christiaan
• Format: Others
• Language: English
• Published: Nelson Mandela Metropolitan University 2010
• Subjects: Electricity > Costs; Electric utilities > Rates
• Online Access: http://hdl.handle.net/10948/1436

South African electricity tariffs were relatively low compared to the rest of the world. The average South African business has for long taken this advantage for granted and is now surprised to realise that electricity is becoming an expensive and scarce commodity. The South African electricity supply industry is far more complex than the average person may think. The infrastructure supporting this industry is extremely costly; takes long to develop and build and requires careful planning and management. There are many sources of energy and many technologies for generating electricity. However, many of these do not appear quite ready to serve the needs of the industry. The manufacturing industry depends heavily on electricity. The recent power outages and tariff increases have served as a cruel reminder of this fact. The automotive sector has lost many days of production and the increasing electricity costs erode the profitability of the affected companies. The automotive suppliers and vehicle manufacturers have expressed their concerns. Indications are that some have reduced the number of employees and may even face bankruptcy. This research aims to gain the perspective of senior managers in the automotive industry regarding the impact of the increased electricity tariffs on their manufacturing costs. Naturally, all electricity consumers will be affected by this. However, this research aims to investigate the significance of the effect on the automotive industry as well as obtain some indication of which factors determine the level of dependency. Each company has to react strategically to the situation and apply those measures which are available to them. This research determines how strongly the industry feels about reacting and which strategic measures they will apply. The outcome is descriptive of the circumstances in the industry and indisputably serves as an indication of the financial impact of electricity tariff increases.