The private sector is taking over from Eskom

Renowned economist Dawie Roodt said Eskom would continue to make losses and raise prices, forcing the private sector to take over electricity generation.

Speaking to the SABC, Roodt said Eskom has lost around a third of its market share over the last ten to fifteen years.

The Eskom price hikes have also resulted in South Africans using electricity far more efficiently and sparingly.

“South Africa’s electricity efficiency improved by around 20% over the last decade because of higher prices,” he said.

“The private sector is taking over from Eskom. In a way, South Africa is privatising Eskom like courier companies privatised the SA Post Office.”

Roodt said South Africa has a government with the wrong policies and that ran Eskom and other state-owned enterprises into the ground.

“If we want services that used to be provided by SOEs, we have to provide them ourselves. That is what is happening now.”

Roodt’s comments align with independent energy expert Mohammed Madhi, who said the latest price increases are needed to keep Eskom afloat.

The price increases, which licked in on 1 April 2024, only cover a portion of what Eskom needs because of its rising cost base.

The rising cost base includes increased maintenance costs, rising debt servicing costs, and an eroding market share because of solar PV installations.

In turn, Eskom is forced to make the same or more revenue from fewer clients. The only way is to increase prices.

“The 12.74% electricity price increase is not the end of the story. We will see similar increases for at least five to ten years,” he said.

Madhi argues that Eskom is shooting itself in the foot with the above-inflation electricity price increases.

Renewable electricity prices, like solar PV, decrease year-on-year while Eskom prices increase.

“We have already reached the point where renewable electricity prices are cheaper than Eskom’s rates,” he said.

He added that baseload power through renewable energy will be cheaper within the next eighteen months than Eskom’s baseload pricing.

“If Eskom continues with its price increases, nobody will need its baseload electricity eighteen months from now.”

Companies and households will be able to install renewable energy with battery backup, which produces cheaper electricity than Eskom.

This means that Eskom is pricing itself out of the market, making it more attractive for South Africans to produce their own electricity.

Former Eskom CEO Andre de Ruyter warned that if the current trend continues, Eskom will be left with mainly non-paying customers.

De Ruyter said an increasing number of South Africans are turning to alternative power solutions, like solar PV and battery backup, for their electricity needs.

These are typically Eskom’s paying customers, which means it may soon be left with customers who cannot afford or refuse to pay for electricity.

“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.

South Africans experienced the worst load-shedding in the country’s 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.

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

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

De Ruyter explained that if this trend continues, Eskom will be left with only non-paying customers. This includes private citizens and municipalities.