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March 25, 2010

SOUTH AFRICA: Electricity price hike threatens global competitiveness

A 25% hike in electricity charges due to come into effect in South Africa on April 1 will place strain on car makers and suppliers global competitiveness according to Nissan SA purchasing chief Stefan Haasbroek.

A 25% hike in electricity charges due to come into effect in South Africa on April 1 will place strain on car makers and suppliers global competitiveness according to Nissan SA purchasing chief Stefan Haasbroek.

He said Nissan is expecting a substantial increase in its electricity bill while all companies will feel the impact, including the company’s 80 component suppliers, already facing difficulty in becoming and remaining globally competitive as local cost pressures continue to mount.

These include rising raw material prices and supply chain costs as South Africa is located far from its major import and export markets.

Haasbroek told the Engineering News newsletter that the industry is doing its best to cut energy costs by implementing some innovative solutions. Nissan is tracking consumption meticulously in the various operations at its Rosslyn plant.

It is also changing shift patterns to reduce electricity use during peak tariff hours.

Haasbroek said: “It is not just about how much you consume, but when. We are investing significant resources to see how we can reduce our electricity bill.”

He added that component suppliers were implementing similar off-peak solutions. “Some of our suppliers have negotiated with the municipality and use Monday as a maintenance day, and then run a full operation on Sundays. When other plants are coming on stream, they are powering down.”

Haasbroek said all component makers would feel the cost of the tariff hikes, but noted that the effect would be far worse on higher electricity users. These, for example, included alloy wheel producers operating furnaces, which used vast amounts of electricity.

He added that it was not possible for Nissan to simply pass the cost onto the consumer by hiking vehicle prices. “Competition is severe. We have to find ways to counter the cost increases.”

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