Private sector taking over electricity generation from Eskom

Truth and Energy civil nuclear engineer Hugo Kruger said Eskom is no longer a monopoly as the private sector is slowly taking over electricity generation in the country.

Kruger’s comments come in light of Eskom reporting its financial results for the year through March 2023. 

The power utility confirmed in its results presentation earlier this week that its net loss after tax increased to R23.9 billion – a significant jump from the R11.9 billion loss reported in 2022.

Eskom interim CEO Calib Cassim said the 2023 financial results reflect the company’s challenging operational performance.

He revealed that municipal debt to Eskom increased from R44.8 billion to R58.5 billion over the last year.

Cassim also revealed that the utility’s energy availability factor worsened from 62.02% to 56.03% in 2023 due to generation supply constraints and shortfall from the IPP programmes.

Faced with intense power cuts with seemingly no end in sight, South African households and businesses are increasingly turning to alternative energy sources.

Data from Eskom and Professor Anton Eberhard revealed that South African households and businesses had installed 4,400 MW of rooftop solar PV.

Eberhard posted data from Eskom, which showed that the country’s installed solar rooftop PV increased from 983 MW in March 2022 to 4,412 MW in June 2023 – a 349% increase

Furthermore, this allows companies to continue to operate during outages, reducing the impact of load-shedding on lost trading hours.

The import of solar panels also hit a new record, with R8.4 billion worth of panels being imported in the second quarter of 2023, over double the amount imported in the year’s first quarter.

The value of imports in the first half of 2023 is more than the entire value imported in 2022, which was R5.6 billion.

R12 billion worth of solar panels have been imported by South Africans so far in 2023, adding 2,200 MW of capacity to the grid. 

Eskom acting CEO Calib Cassim

“If you look at solar installations in South Africa a few years ago, it was a luxury. Now, the cost of solar panels has become extremely affordable,” Kruger said. 

While everyone cannot afford batteries and solar panels, people can shift their demand.

“They’re starting to cook on gas; they’re doing all kinds of things to avoid Eskom. So, Eskom is no longer a monopoly, and they must come to terms with that mindset,” he said. 

If the state wants to have a state-owned enterprise, it now has to compete against the private sector, which Eskom is struggling to do.

The fourfold increase in solar rooftop PV significantly reduces the residual load that Eskom needs to meet during the day, which has cut into the utility’s revenue.

Bloomberg reported that the surge in the installation of solar panels on houses and business premises has already cut Eskom’s sales by 2.3%.

A good example is the Buffalo City Metropolitan Municipality. Wit a population of more than 700,000 people, it lost R350 million in revenue because of solar installations.

This is bad news for the utility already struggling to keep afloat.

‘Back-door privatisation’

Dawie Roodt
Dawie Roodt

In February, Finance Minister Enoch Godongwana announced that the National Treasury would be taking over a significant portion of Eskom’s debt through a R254 billion debt relief package.

However, this bailout did not come without strings attached, as the Minister also outlined several conditions for the utility.

Eskom, the National Treasury, and the Department of Public Enterprises have agreed to design a mechanism for building new transmission infrastructure that will allow for extensive private sector participation in developing the transmission network.

In addition, Eskom must implement the operational recommendations emanating from an independent assessment. 

This will include determining which plants can be resuscitated to the original equipment manufacturer’s standards.

Eskom must then concession all these power stations with clear targets for the electricity availability factor and operations. 

Many experts agreed that these conditions spell out the privatisation of Eskom. 

Efficient Group chief economist Dawie Roodt said this is a “back-door kind of privatisation” with the Treasury forcing Eskom to privatise its distribution network and partially privatise its generation fleet. 


Top JSE indices