PRESENTATION TO NERSA BY Mr WH BOSHOFF

PRESENTATION TO NERSA BY Mr WH BOSHOFF

The presenter has been in property and development for over 20 years. He is the owner of numerous commercial developments and various other properties. He is paying millions of Rands towards electricity monthly to this Municipality.

Businesses can no longer afford these continuous increases in electrical costs. Some of the affects are: Mass Exodus of Zoned Business Areas Businesses are leaving the zoned business areas and starting to trade in the residential areas illegally to survive as they can no longer afford to pay high electrical costs in the formal zoned business areas, especially small and medium sized businesses Large Vacancies of Commercial Properties Malls and office blocks are starting to empty as businesses are closing down/moving to areas where they no longer pay business tariffs but residential tariffs

Drop in Property Values This will cause property values to plummet, which means less future income to municipalities with regards to rates & taxes every year Impact on National Treasury As businesses pay more and more for utilities and rates, their profits diminish which again means that less taxes/income goes to the National Treasury

Job Creation Job creation is systematically being destroyed as employers have no choice but to retrench employees in order to survive these increases The high costs of electricity is one of the biggest challenges facing future growth and job creation in SA Negative Impact on GDP The average disposable income of people will continue to diminish The past increases and new increases will cause inflation to escalate, which will increase interest rates

WE CAN ALL SEE THAT THE PAST INCREASES HAVE AFFECTED THE ECONOMY NEGATIVELY ALREADY FURTHER THESE INCREASES WILL EVENTUALY DESTROY THE BUSINESS SECTOR AND LOCAL ECONOMY

Poor Billing Controls NERSA is allowing certain Municipalities Carte Blanche with regards to formulating new electricity tariffs that is passed to the consumer Non Compliance with Prescribed NERSA Guidelines These Municipalities are not managing their resources properly and as a result, they need to supplement their income with huge increases in their electricity tariffs to create more income. These municipalities do not follow the prescribed NERSA guidelines

Manipulation of Numbers The municipality gets creative with their tariff structures and use clever mathematics to hide the real actual increases

The real increases from 2008 2012 for Businesses in Kimberley 318.96% Unequal Rate Charges Currently the same business with exactly the same usage in different parts of SA pay double in certain areas as opposed to other areas in SA

Stellenbosh 2012 Breede Valley 2012 City of Capetown 2012 Dithlabeng - Bethlehem 2012 Matjhabeng - Welkom 2012 Moqhaka - Kroonstad 2012 Knysna 2012 George 2012 Durban 2012 East London / 'Ekurhuleni Tariff Nelson Mandella Bay 2012 Ekurhuleni 2012 D-B-A Middelburg Mphuma 2012 Nelspruit 2012 Bethal 2012 Witbank 2012 Polokwane 2012 Pretoria 2012 Pretoria TOU 2012 Emfuleni 2012 Randfontein 2012 Mogale City 2012 Mogale City TOU 2012 City power 2012 Kimberley 2012 Bloemfontein 2012 Maletswai 2010 Klerksdorp 2012 The following graph is an extraction of facts, which shows what a convenience centre with a Pick n Pay Family store, Spur, Hair Salon and a biltong shop, will pay in different parts of SA (Summer Consumption) Municipality MV R 180 000.00 R 160 000.00 R 140 000.00 R 120 000.00 R 100 000.00 R 80 000.00 R 60 000.00 R 40 000.00 R 20 000.00 R -

Currently the most expensive and most inexpensive cities/towns in SA for summer consumption are as follows: Municipality MV - High vs Low R 180 000.00 R 160 000.00 R 140 000.00 R 120 000.00 R 100 000.00 R 80 000.00 R 60 000.00 R 40 000.00 R 20 000.00 R - Stellenbosh 2012 R 80 856.25 Kimberley 2012 R 163 391.90 Average R 110 939.22 1 This clearly indicates that these increases have become unsustainable in certain areas

An actual example of electrical cost exceeding current gross rentals: Monthly Bill McDonald s John Dory s Pick n Pay Rental R41,661 R35,826 R193,071 Electricity R60,067 R36,650 R266,065 % of rental 144.18% 102.30% 137.81% Tenants can no longer afford these electricity costs

These graphs clearly show that there is currently no balance in the price of electricity in SA, therefore not equitable Eskom s vision of the right balance for the country as stated in their application is currently not a reality in SA Property investors and developers will resist investing in this area, should they become aware that the municipality s winter tariffs are the most expensive in South Africa Increases of 16% per annum over the next 5 years will cripple South Africa s commercial property market and specifically this area further. This does not even include what the municipalities are adding on top of this

Municipalities need to have a proper price structure regulated by NERSA which must fall within National Guidelines Tariffs need to be in line with local income and the local economy of a specific city NERSA needs to act against all Municipalities that do not adhere to their guidelines