As South Africans settled into the Easter long weekend, Eskom, the nation’s primary electricity utility, announced an upcoming 12.72% tariff increase set to take effect at the start of the new financial year on April 1, 2024. This decision comes after approval from the National Energy Regulator of South Africa (Nersa), which Eskom had petitioned in October 2023 for permission to adjust its retail tariffs and structure for the period extending from April 2024 to March 2025.
Eskom, a crucial component of South Africa’s energy sector, faces significant financial challenges, including a hefty reliance on government bailouts to manage its substantial debts. This tariff adjustment, while a move towards financial sustainability for Eskom, places additional strain on consumers across the country. The utility has disclosed that for the 2024/25 financial year, there will be no changes to the tariff structure, although plans are in place to propose a restructuring for the following year, aiming for implementation in 2025/26.
The implications of this tariff hike extend beyond Eskom’s direct customers to include municipalities that purchase electricity wholesale from the utility to distribute locally. Starting from July 1, 2024, these municipalities are expected to face a compounded increase in electricity costs. Vally Padayachee, a strategic advisor for the Association of Municipal Electricity Utilities (AMEU), hinted at an additional approximately 10% increase that municipalities might add to Eskom’s 12.72%, potentially raising local electricity tariffs by around 23% for the financial year 2024/25.
This substantial hike is poised to exacerbate the financial burden on a populace already grappling with a weakened economy and rising costs of basic commodities. The move is anticipated to significantly impact municipalities’ operations, as they rely heavily on electricity sales as a primary source of revenue. With the cost of electricity purchases accounting for a large portion of their income, municipalities find themselves with dwindling resources to manage day-to-day operations.
Moreover, the escalating electricity tariffs are pushing an increasing number of customers towards self-generation options, opting to go off the national grid in search of more economical alternatives. This trend not only threatens the financial viability of Eskom and affected municipalities but also highlights the urgent need for a sustainable solution to South Africa’s energy pricing and supply challenges.
The debt owed to Eskom by municipalities, which stands at a staggering approximately R73 billion, underscores the severity of the financial predicament facing the country’s electricity supply chain. While certain rebates are available for poorer households, they fall short of sufficiently mitigating the impact of these tariff increases.
