- Eskom proposed 36% electricity tariff hike faces strong opposition as public hearings begin, with the energy regulator set to assess the proposal.
- Eskom is also battling unpaid municipal debts, with Johannesburg facing potential power cuts unless it settles a 4.9-billion-rand debt.
Eskom, South Africa’s state-owned power utility, has proposed a 36% electricity tariff increase, sparking strong opposition from the public as the country began nationwide hearings on Monday, November 18, 2024, to gather public opinion. The energy regulator, Nersa, is hosting the consultations to assess the proposal, but Eskom’s request for substantial tariff hikes has drawn fierce criticism. Electricity Minister Kgosientsho Ramokgopa previously acknowledged that such an increase might be untenable for consumers, highlighting the challenge of balancing Eskom’s financial stability with affordability for the public.
Despite facing years of financial struggles and routine power outages, Eskom’s performance has improved in 2024, with South Africa going over 200 days without power cuts. This positive turnaround has boosted investor confidence, raising hopes for faster economic growth. Eskom, determined to resolve its financial difficulties and maintain an uninterrupted power supply, submitted a request for tariff hikes of 36%, 12%, and 9% over the next three years. Nersa typically does not approve the total amount Eskom seeks.
Eskom also grapples with unpaid bills from thousands of consumers, including local municipalities. Recently, the utility company threatened to cut power to Johannesburg, South Africa’s economic hub, unless the city paid its outstanding debt of 4.9 billion rand ($275 million). Local governments across South Africa owe Eskom about 90 billion rand ($5 billion), worsening the utility’s financial strain. Eskom stated that it could no longer accommodate Johannesburg’s debt without further damaging its business.
The proposed power cuts have sparked backlash, with businesses condemning Eskom’s actions as unjust and potentially harmful to the city’s residents and economy. Accusations of overbilling and disputes over meter verification have also surfaced, further straining relations between Eskom and consumers. Minister Ramokgopa has called for another verification and assessment process to determine the “point of failure” in the billing and collection system. Despite the ongoing dispute, Johannesburg is expected to settle a 1.4 billion rand ($78 million) bill by the end of November.
The government has pledged to prevent Eskom from carrying out power cuts, acknowledging the severe impact on the economy and the livelihoods of millions, especially in a country already suffering from high unemployment. Eskom, meanwhile, faces falling revenues as more consumers move to alternative power sources, adding to its financial struggles. With its debt crisis mounting, Eskom is under pressure to recover unpaid bills, including by attaching bank accounts from local governments. Still, any widespread outages could harm its role in supporting South Africa’s economic growth.
As Eskom approaches a critical deadline in December, the company’s ability to recover financially remains uncertain, particularly if Nersa rejects the proposed tariff increases. The situation is critical, with experts warning that Eskom’s financial woes could worsen in 2025, further threatening the stability of the power sector and the broader economy.