The impact of high electricity tariffs on small, medium and micro enterprises in the Rustenburg Area

Abstract

Historically, South Africans have benefited from relatively cheap electricity where tariffs have not been cost-reflective. However, since early 2008 the average electricity tariffs have continued to increase considerably. The continuous increase in electricity tariffs in South African has been a topic of debate over the recent years. The tariff increase did not only increase household spending, but as well threatens the sustainability and has negatively affected firms' performance and profitability. In addition, the increases have also raised concerns around affordability for end users, especially Small, Medium and Micro Enterprises (SMMEs). To this end, this study investigates the negative impacts of increase electricity tariffs on the operations and performance of SMMEs operating in the Rustenburg area in the North West province of South Africa. A descriptive survey research designed with a quantitative approach was used to collect and analysed empirical data from 29 SMMEs in various business sectors in Rustenburg, the North West province of South Africa. The results revealed that an increase in electricity tariffs has indeed negatively affected firms' performance (profitability). In addition, it was further realised that an increase in electricity tariffs severely affects SMMEs located in the Rustenburg area than those located elsewhere in the country. From these findings, recommendations were made to electricity stakeholders as well as for future research.