Eskom’s sales have continued their decline as South Africa’s private sector continues to reduce its reliance on the utility for electricity supply.
This was revealed in Eskom’s interim results for the six months to the end of September, where the utility said its sales volumes declined by 5.9%.
“The decline was largely a result of supply constraints, which led to load-shedding and load curtailment, coupled with lower electricity demand from customers at times due to difficult economic conditions and the impact of increased embedded self-generation such as solar PV and wind,” Eskom said.
Research from RMB Morgan Stanley shows that the private sector will effectively replace Eskom’s generation fleet in the next two years.
The utility’s performance has deteriorated markedly over the last few years, with 2023 seeing record levels of load-shedding.
However, the narrative around electricity generation and load-shedding is beginning to change. It is gradually becoming more positive.
The private sector is filling the void left by Eskom in a similar fashion to how private airlines filled the void left by the collapse of South African Airways.
South Africa is experiencing a boom in solar installations, with over 4,400 MW of rooftop solar installed outside of the government-procured solar. This is expected to increase by 420% by 2030.
Data from Eskom and Professor Anton Eberhard revealed that South African households and businesses had installed 4,412 MW of rooftop solar in the 12 months to June 2023, a 349% increase from March 2022.
The import of solar panels has also hit a new record, with R12 billion worth of panels imported by South Africans in 2023, adding 2,200 MW of capacity to the grid.
The fourfold increase in rooftop solar power generation capacity has begun to impact Eskom’s revenue as fewer private sector clients rely on the utility for electricity.
The surge in the installation of solar panels on houses and business premises has cut Eskom’s sales by 2.3%, according to Public Enterprises Minister Pravin Gordhan.
Privatisation by stealth
Renowned economist Dawie Roodt said this is a “back-door kind of privatisation”, with Eskom privatising its distribution network and partially privatising its generation fleet.
However, this “is not privatisation as policy”. Roodt said the state is simply collapsing, and the private sector is merely taking over state functions.
The privatisation process will continue, but he added that it will take 18 to 24 months before significant changes will be seen.
The data from RMB supports Roodt’s argument that the private sector will effectively replace Eskom’s generation capacity by 2025.
In the long term, electricity generation will be private, with Eskom merely distributing electricity and the utility being relegated to buying electricity from other entities and selling it on.
Despite the significant shift in electricity generation, the government maintains that it will not privatise the power utility.
The Ministry of Finance explicitly said, “the government has no intention to privatise Eskom”, and the utility’s strategic assets will not be privatised.
However, Deputy Finance Minister David Masondo said the Treasury does not support a state monopoly in the energy sector, and they will not rely solely on Eskom to generate energy.
Masondo’s comments were echoed by Gwede Mantashe, Minister of Mineral Resources and Energy at Absa’s Post-Budget Analysis.
Mantashe said the government intends to “reform electricity supply from a monopolistic industry to a competitive one” per the 1998 White Paper of Energy Policy.
The government aims to diversify electricity generation sources and “remains resolute in ensuring that such an electricity market structure comes to fruition”.
However, Mantashe added that it would be a mistake to “totally remove the public sector” from electricity generation.