Options for managing electricity supply to alluminium plants in South Africa

TIPS recently completed a study investigating the impact of the controversial Eskom electricity supply agreement with Aluminium mining conglomerate BHP Billiton using a cost-benefit analysis (CBA) methodology to assess the costs and benefits to society of cancelling the special pricing agreement (SPA) that Eskom has with BHP Billiton. The CBA considered the following scenarios (i) Continuing with the current electricity arrangement (ii) Removing the electricity subsidy permitted to the BHP aluminium smelters and allowing the electricity price they pay to adjust to megaflex rates, and (iii) Comparing scenarios (i) and (ii).

The focus of this Development Dialogue will be to present the quantitative aspects of this research. The Development Dialogue calls for an interesting discussion as this is a hotly debated issue in South Africa at the moment, with the National Energy Regulator of South Africa (NERSA) having received a request from Eskom in 2012 to investigate its contract with BHP.

ABOUT THE SPEAKER

Dinga Fatman has a Masters degree in Economics at the University of KwaZulu-Natal. He joined TIPS in 2011 to provide research assistance in the industrial policy pillar. His Masters dissertation topic was entitled: “Labour Regulations and Firm Performance in South Africa”. Dinga's general research interests involve South Africa's investment climate issues and advanced econometrics.