SA’s power utility to hike price by 57% in three years

From the newsletter
Eskom, South Africa's national power utility, has proposed a 57% electricity price increase to be implemented in phases. This includes a 36% increase in 2025, followed by 11% in 2026 and 9% in 2027. Since 2007, electricity prices have increased by over 300%, prompting many customers – both large and small consumers – to move off the grid.

• The challenge has mainly arisen from Eskom's ageing coal generation fleet, which accounts for over 80% of its total generation. The heavy maintenance required has burdened Eskom with high costs, pushing it into financial losses. In 2023, Eskom's total debt reached $23 billion, forcing the utility to increase prices to recoup investment costs.

• This trend in South Africa is similar to that in other African countries, where national power utilities face challenges due to ageing technology and inefficient revenue collection mechanisms, costing them millions of dollars. Nigeria, Kenya, and Ghana's power utilities have all been struggling with financial losses.

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• The impact of these electricity price surges is significant. High electricity costs and load shedding hinder economic growth, drive inflation, and diminish South Africa's global competitiveness. Load shedding alone costs the economy up to $48 million each day.

• Businesses and households are severely affected. Electricity price hikes have pushed over 60% of households into energy poverty, and companies like Anglo-American, Nampak, and Woolworths are relocating to countries with more stable electricity prices.

• Frustrated by Eskom's unreliable service, South Africans are turning to alternative energy solutions, such as solar power. By mid-2023, 4.4 GW of rooftop solar capacity had been installed. This trend is mirrored across Africa, with 40% of businesses in countries like Nigeria and Ghana relying on backup generators due to unreliable grid power. This highlights the urgent need for investment in grid infrastructure, renewable energy, and energy policy reforms to ensure affordable and reliable electricity for all.

• South Africa is particularly affected by rising electricity tariffs and the broader energy crisis in Africa. Eskom's 18.65% tariff hike in 2023, coupled with a more than 300% increase since 2007, has made electricity unaffordable for many. Record load shedding (over 200 days in 2023) has cost the economy, lowering GDP growth by 2%.

Our take

• Electricity prices in Africa are set to continue rising, driven by ageing infrastructure and subsidy cuts as governments grapple with debt repayments. However, the long-term outlook offers some optimism, with the growth of renewable energy, decentralisation, and private-sector investment potentially stabilising or even reducing costs.

• Across the continent, households and businesses are increasingly turning to solar power and battery storage to secure affordable and reliable electricity, reducing their reliance on unstable national grids. As grid challenges persist, this trend towards self-generation is expected to accelerate significantly.

• This shift presents energy companies with opportunities for innovation and growth. By expanding into renewable energy solutions (solar, wind, batteries), offering decentralised systems (mini-grids, off-grid solutions), and providing innovative financing models (pay-as-you-go, leasing), companies can meet this expected demand. Furthermore, utilising smart technologies and hybrid solutions, collaborating with governments and NGOs, and focusing on the commercial sector will further enhance their prospects.