South African taxpayers and consumers are paying the price for Eskom’s financial failures, as another above-inflation price hike has been implemented.

This is feedback from Efficient Group chief economist Dawie Roodt, whose comments come after Eskom’s electricity prices increased on 1 April 2024.

At the start of April, Eskom confirmed that it will implement its annual price increase. The National Energy Regulator of South Africa (Nersa) granted Eskom a 12.74% increase for its direct customers.

“The average increase applied to the key industrial and urban tariffs will be 13.29% due to the increase in the affordability subsidy charge,” Eskom stated.

“The affordability subsidy charge is raised as a subsidy to the Homelight 20A tariff and is determined by Nersa.”

“This charge exists due to historically lower Homelight 20A tariff increases and is paid by the non-municipal large industrial and urban tariffs.”

Nersa also granted a 12.72% increase to municipal customers.

Roodt told SABC News that the reason these massive price increases were implemented was because Eskom is “in very, very deep trouble financially”.

“Eskom owes hundreds of billions of rands. Eskom is not very efficiently run. Eskom keeps on making huge, huge losses and we, the taxpayer, will have to stand in for that,” he said. 

“So those are the reasons why we get these well above-inflation increases in electricity prices.”

Eskom reported its net loss increased to R23.9 billion in the last financial year – a significant jump from the R11.9 billion loss reported in the previous period.

This was the company’s seventh consecutive loss as Eskom crumbled under the weight of its debt pile, high financing costs, poor plant performance, and a ballooning municipal debt. 

The utility’s chairman also recently said he expects another over R20 billion loss for this financial year.

Bailout billions

Roodt pointed out that South Africans are paying for Eskom’s failures not only through higher electricity prices but also through the billions in bailouts the utility has received.

In his February 2023 Budget, Finance Minister Enoch Godongwana announced a R254 billion debt-relief package for Eskom.

It aims to strengthen Eskom’s balance sheet, freeing up money for the utility to undertake plant maintenance and improve the transmission and distribution infrastructure. 

Eskom’s debt burden stood at R423 billion in February 2023.

As part of the plan, the government was due to provide Eskom with three annual advances totalling R184 billion through March 2026 to repay maturing debt and cover interest costs,

While the debt package has been marginally reduced, some experts believe that another bailout for the struggling utility is inevitable.

Truth and Energy civil nuclear engineer Hugo Kruger said he is sceptical about Eskom’s claims that it does not need another bailout from the National Treasury as the utility’s performance continues to decline.

Kruger said the number many people are overlooking is that Eskom’s unplanned maintenance was at 30% in 2023, up from 25% last year. 

“So basically, Eskom is like a Soviet vacuum factory at this stage – it is just chowing money,” he said. “They say they don’t want to have a bailout again, but I’m very sceptical of that.”

Eskom has had to spend increasingly more on diesel over the past few years as the utility’s coal power plants cannot keep up with demand, and it has to use its diesel-powered open-cycle gas turbines to subsidise supply.

In addition, one of Eskom’s biggest challenges is that it loses sales, and therefore revenue, as load-shedding intensifies and people increasingly turn to alternative energy sources.