Business

Eskom will be left with only poor and non-paying customers

Eskom’s incessant above-inflation price hikes and poor performance will chase wealthy consumers away, leaving the utility with only poor customers.

This is according to Efficient Group chief economist Dawie Roodt, who told SABC News that the utility would keep raising prices as its financial health continues to deteriorate.

His comments came after Eskom confirmed that it would implement its annual price increase at the start of April. 

The National Energy Regulator of South Africa granted Eskom a 12.74% increase for its direct customers, combined with a 25.64% affordability subsidy.

“I can promise you, we’re going to see more electricity price increases as long as Eskom is managed in the way it is managed and as long as Eskom has this huge outstanding debt and as long as Eskom keeps on making losses – and they will keep on making losses,” Roodt warned.

Eskom has made consecutive losses over the past seven years – with another loss projected for this year – as the utility crumbles under the weight of its debt pile, high financing costs, poor plant performance, and ballooning municipal debt. 

One of Eskom’s biggest challenges is losing sales and, therefore, revenue as load-shedding intensifies and people increasingly turn to alternative energy sources.

To make up for these lost sales, Eskom implements above-inflation tariff hikes, like the one seen at the start of April.

The effect of these increases can be seen in Eskom’s 2023 results – the utility’s revenue rose by 5% despite declining sales, yet it still made a massive loss.

Roodt warned that this is unsustainable, and Eskom will continue to hike electricity prices as its financial health continues to deteriorate.

However, he said this strategy will soon come back to haunt the utility, as an increasing number of South Africans who can afford to are ditching Eskom in favour of alternative energy generation options like solar panels.

“There’s nobody else they can pass the cost on to, and I can also add that many, many clients of Eskom are leaving, and the clients that are leaving are the paying clients mostly,” Roodt said.

“The clients that are remaining behind are mostly poor people, so Eskom is getting deeper and deeper into financial troubles.”

Former Eskom CEO Andre de Ruyter

Roodt’s comments echo a warning from former Eskom CEO Andre de Ruyter, who warned that Eskom may soon be left with customers who cannot afford or refuse to pay for electricity.

De Ruyter told Business Day Spotlight at the end of last year that Eskom’s current path is unsustainable.

“If you extrapolate from current trends, Eskom will eventually be left with a customer base of people who cannot afford electricity and therefore don’t pay for it,” he warned.

This is because more South Africans have turned to energy sources like solar panels as a more reliable alternative to state-owned power utility.

South Africans experienced the worst load-shedding in history in 2023, with 335 days of load-shedding in the year.

This saw a significant uptick in solar installations from both businesses and households. 

South Africa imported over R16.5 billion worth of solar panels in the first nine months of 2023, equal to over 4,500 MW in generation capacity. 

From the beginning of 2023 to the end of 2025, RMB estimates that the private sector will add over 6,000 MW to the grid. From 2025 to 2030, it will add a further 19,300 MW. 

However, only wealthier South Africans can afford these alternative options, while poorer citizens are still reliant on Eskom.

De Ruyter explained that if this trend continues, Eskom will be left with only non-paying customers, who can either not afford electricity or refuse to pay. This can include private citizens and municipalities.

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