Umair Gaines
Electricity prices in South Africa have been increasing at an alarming rate, with a proposed 36.1% hike for 2025. This is largely due to the sole supplier of electricity in the country, Eskom, which has been criticised for financial mismanagement and inadequate infrastructure. Eskom's sales have been declining since 2006, and its expenditure has been growing significantly since 2007 without a corresponding improvement in performance. As a result, Eskom has had to increase prices to cover its debt costs, and these costs are passed on to consumers. The high costs of electricity are affecting both businesses and ordinary citizens, and there is a concern that the price hikes will worsen the economic difficulties facing South Africa.
| Characteristics | Values |
|---|---|
| Electricity price hike in 2025 | 36.1% |
| Electricity price hike in 2024 | 13% |
| Electricity price hike in 2023 | 18% |
| Inflation | 4.4% |
| Unemployment rate | 33.5% |
| Economic growth in 2023 | 0.6% |
| Electricity tariff increases from 2007 to 2022 | 653% |
| Inflation from 2007 to 2022 | 129% |
| Eskom's expenditure from 2007 to 2021 | R680 billion |
| Eskom's average electricity price in 2024 | R2.20 to R2.50 per kilowatt-hour |
| Electricity price increase in April 2021 | 15.63% |
| Electricity price increase in April 2022 | 9.61% |
| Electricity price increase in April 2025 | 12.7% |
| Household electricity costs increase since 2017 | 60% |
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What You'll Learn
The electricity company Eskom's financial instability
Eskom's financial woes can be attributed to several factors, including increased financing costs, poor management, and a decline in sales volumes. The utility's expenditure has grown significantly since 2007 without a corresponding improvement in performance. Major projects, such as the development of new power stations, have been riddled with cost overruns and technical challenges. Additionally, Eskom's sales have declined by an estimated 0.5% per year since 2006 due to load-shedding and lacklustre economic growth.
The company's deteriorating credit ratings have further exacerbated the situation, affecting its ability to borrow and pay off mounting debt service costs. As a result, Eskom has become increasingly reliant on price increases as a source of revenue growth. However, this approach is unsustainable and has led to a vicious cycle of higher prices and declining sales. The National Treasury has urged Eskom to find effective ways to increase actual electricity sales, but the company has struggled to implement meaningful cost-saving measures.
Eskom's financial instability has had a significant impact on South Africa's economy and its citizens. The high electricity costs have affected businesses, particularly small and medium enterprises, and have contributed to the country's already high unemployment rate. With limited choices for their energy sources, ordinary citizens have had to bear the brunt of these price increases, often turning to alternative energy solutions like solar power to reduce their long-term expenses.
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The company's mismanagement and crisis spending
South Africa's electricity prices have been increasing steadily over the last decade, with household electricity costs increasing by 60% since 2017. The power utility company, Eskom, has been criticised for its role in the escalating prices, with its electricity tariff increases being called "exorbitant". The company's financial mismanagement and crisis spending have been passed on to consumers, resulting in a cycle of increasing prices and declining sales.
Eskom's spending has been characterised by ballooning costs without a corresponding improvement in performance or revenue. Between 2007 and 2021, the company spent R680 billion with generally poor results. Major projects during this period included the return of three end-of-life power stations, the development of two additional peaking plants, and the construction of two very large new power stations, Medupi and Kusile. The latter two plants were particularly problematic, requiring an additional R33 billion due to cost overruns and breakdowns.
The company's capital expenditure and debt burden have significantly impacted the underlying electricity tariff costs. Eskom's worsening credit ratings since 2018 have affected its ability to borrow and service its mounting debt. Despite support from the National Treasury, Eskom has struggled to generate sufficient revenue, with its sales declining by an estimated 0.5% per year since 2006 due to load-shedding and lacklustre economic growth.
Eskom's financial challenges have been further exacerbated by the decline in electricity sales as customers seek alternative energy sources. Some companies have installed their own generation capacity, and individuals have moved to rooftop solar systems, resulting in a drop in revenue for Eskom. This has created a knock-on effect, with municipalities, the biggest distributors of electricity, being forced to increase tariffs in line with Eskom's hikes.
The company's inability to effectively manage its finances and control spending has contributed to the ongoing crisis in South Africa's electricity sector. With Eskom holding a monopoly over the country's electricity supply, consumers have little choice but to bear the burden of increasing prices. As a result, South Africans are seeking ways to reduce their dependence on the grid, further threatening Eskom's sustainability and financial viability.
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Poor infrastructure and financial mismanagement
South Africa has seen a significant increase in electricity prices over the last decade, with household electricity costs increasing by 60% since 2017. The power utility company, Eskom, has been implementing regular price increases, with a 12.7% hike in April 2025, an 18% increase in 2023, and a 13% increase in 2024. These price hikes are attributed to a range of factors, including poor infrastructure and financial mismanagement.
Eskom's capital expenditure and debt burden have significantly impacted the electricity tariff costs passed on to consumers. The company has struggled with declining sales and revenue, with sales decreasing by an estimated 0.5% per year since 2006 due to load-shedding and weak economic growth. This has resulted in a reliance on price increases as a source of revenue growth. However, these price hikes have outpaced inflation and are considered unaffordable for many South Africans, especially given the country's high unemployment rate and slow economic growth.
Eskom's financial challenges have been exacerbated by its ballooning costs, primarily driven by increased financing costs. Between 2007 and 2021, Eskom's expenditure grew significantly without a corresponding improvement in performance or revenue. Major projects during this period, such as the construction of the Medupi and Kusile power stations, were plagued by cost overruns and technical challenges. The company's deteriorating credit ratings have further compounded its financial woes, affecting its ability to borrow and manage its debt service costs.
The South African government has acknowledged the need for restructuring Eskom, but progress has been slow. The government must ensure that price increases are affordable and do not hinder economic growth. Communities and businesses also have a role to play in reducing energy consumption and exploring alternative energy sources to mitigate the impact of rising electricity prices.
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South Africa's high unemployment rate
South Africa has the highest unemployment rate in the world, at 33.5% as of 2023. Economists estimate that the real unemployment rate is even higher, at 42%, when including those who have given up looking for work and are no longer registered as unemployed. This situation has been described as a "ticking time bomb" by a United Nations report.
The country's high unemployment rate is exacerbated by its slow economic growth, which was a mere 0.6% in 2023. South Africa's electricity prices have been increasing sharply, with a 36.1% hike requested for 2025, adding to the economic difficulties faced by the country. The power utility Eskom has implemented steep price increases, with an 18% increase in 2023 and a projected 13% increase in 2024. These increases are far above the inflation rate, currently at 4.4%.
Eskom's monopoly on the electricity market means that citizens have little choice but to continue relying on their electricity supply, regardless of the costs. The high electricity prices affect businesses, particularly small and medium enterprises, impacting their sustainability. The knock-on effect is that municipalities, the biggest distributors of electricity, are forced to increase their tariffs, passing the costs on to consumers.
The South African government has acknowledged the need for restructuring of Eskom, which is in serious financial trouble, but this process has not yet been completed as of 2022. The country's energy policies are misaligned, with a lack of investment in electricity and a continued dependency on coal-fired power. As a result, electricity is becoming increasingly unaffordable for South Africans, impacting households and businesses alike.
The high unemployment rate and rising electricity prices create a vicious cycle, where increased costs affect businesses' ability to operate and hire new employees, further contributing to joblessness in the country. South Africa's energy frameworks aim to balance energy security, affordability, and sustainability, but the country currently struggles to meet these goals.
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The country's slow economic growth
South Africa's slow economic growth is one of the reasons for the country's increasing electricity prices. The country's economy grew by a mere 0.6% in 2023, and it has a high unemployment rate of 33.5%. This slow economic growth has had a direct impact on the finances of Eskom, the country's sole electricity supplier.
Eskom's sales have been declining by an estimated 0.5% per year since 2006 due to load-shedding and lacklustre economic growth since 2008. This has resulted in a drop in revenue for the company. With electricity sales falling by about 2%, Eskom has had to increase tariffs to make up for the loss in revenue, passing the costs on to consumers.
Eskom's financial mismanagement has also contributed to the issue. The company's expenditure has grown significantly since 2007 without a corresponding improvement in performance or revenue. Major projects, such as the construction of the Medupi and Kusile power stations, were riddled with cost overruns and breakdowns, requiring additional funding to complete. The current electricity pricing regime ties prices to Eskom's costs, so decades of mismanagement and crisis spending are passed on to consumers.
The South African government has acknowledged that Eskom is in serious need of restructuring, which was announced in 2019 but has not yet been completed. Eskom's capital expenditure and debt burden significantly impact electricity tariffs, and the company has struggled to generate sufficient revenue. As a result, Eskom has had to increase prices to cover its debt costs.
The slow economic growth, coupled with Eskom's financial troubles, has resulted in a cycle of increasing electricity prices and declining sales volumes, presenting a sustainability risk for Eskom and the country's economy.
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Frequently asked questions
Electricity prices in South Africa have increased significantly over the last decade due to a range of factors. Firstly, the state-owned electricity company, Eskom, has faced financial instability and poor management, leading to increased costs that are passed on to consumers. Secondly, Eskom's sales have declined, and they have struggled to generate sufficient revenue, leading to a greater reliance on price increases. Thirdly, there is a need to invest in new infrastructure and improve the security of supply, which requires additional funding. Finally, electricity prices are tied to Eskom's costs, and their tariff increases have been above inflation, further exacerbating the issue.
The increasing electricity prices have had a significant impact on South African consumers, with many struggling to afford the rising costs. This is especially true for those on low incomes or fixed incomes, such as the elderly or those on welfare. As a result, some individuals have moved to alternative energy sources, such as rooftop solar systems, to reduce their reliance on the grid.
There are several strategies that individuals and communities can implement to mitigate the impact of rising electricity prices. These include:
- Adopting energy-saving habits such as turning off lights and unplugging devices when not in use.
- Investing in energy-efficient appliances, such as LED lighting and smart thermostats.
- Exploring alternative energy technologies, such as solar power and battery storage.
- Taking advantage of government incentives and subsidies for renewable energy investments.
The South African government has a crucial role to play in ensuring that electricity remains affordable for its citizens without compromising the stability of Eskom. This includes implementing policies that promote energy conservation at the household and community levels, providing incentives for renewable energy adoption, and ensuring that price increases are in line with inflation to avoid further economic difficulties. Additionally, the government should focus on improving Eskom's financial situation through cost-saving measures and addressing their debt burden.
