South Africans still dumping Eskom

Eskom’s sales volumes declined in the first quarter of the 2025 financial year, as companies and households continued to reduce their reliance on the utility. 

This was revealed in a performance update to Parliament’s Standing Committee on Public Accounts (Scopa) earlier this month. 

Eskom has undergone a dramatic turnaround from regularly implementing stage 6 load-shedding late last year to over six consecutive months without any power cuts. 

This has translated into a much improved financial performance for the utility, with Eskom reporting its pretax loss for the first quarter married to R200 million from R6.7 billion a year earlier. 

Eskom last posted a profit in its 2016 financial year. Since then, its losses have only deepened, reaching R23.9 billion in the 2024 financial year. 

Over this period, the utility racked up a significant debt burden, which soared to R445 billion at the end of the first quarter. 

However, its financial health broadly improved from April to the end of June 2024, compared to the same period a year earlier. 

Crucially, its expenditure on diesel to run its Open-Cycle Gas Turbines (OCGTs) has declined 70% year-on-year, resulting in savings of over R6.7 billion. 

This is largely due to a significant improvement in its Energy Availability Factor (EAF), which has improved from 54.5% in March last year to 61.3% at the end of its first quarter. 

These significant savings narrowed its pretax loss, allowing it to reduce its overall debt load by R8.1 billion. 

Based on Eskom’s forecast for the rest of the year, the utility should be able to narrow its pretax loss for the financial year and potentially break even. 

Eskom has ambitious financial targets for the next financial year, expecting to turn a R12 billion profit if it can contain costs and maintain its strong operational performance. 

However, the news was not all good regarding Eskom’s finances. They also revealed that companies and households continue to abandon the utility in favour of alternative energy sources. 

While its revenue for the first quarter rose by 15% compared to the same period last year, its sales volumes were 1 TWh lower. 

This means its increased revenue came largely from higher electricity tariffs charged on consumers. 

It also shows that consumers are still turning away from the utility despite its improved performance, with many pointing to the increased price of electricity as the reason. 

South Africans are paying five times more for electricity in 2024 than they did in 2010 due to repeated above-inflation increases from Eskom. 

Many businesses are trying to mitigate the effects of these increases by using alternative energy options, particularly rooftop solar, to avoid tariff hikes. 

The increased demand from businesses and households has even been cited as a reason for the lack of load-shedding in the past six months. 

Former Reserve Bank deputy governor Kuben Naidoo believes the only reason load-shedding has not occurred recently is significantly reduced output from the mining and manufacturing sectors. 

This has been coupled with many looking to go off-grid in search of lower costs. 

Mining companies are the best example of this, with Harmony Gold estimating its solar installations would save R425 million a year in electricity costs. 

South African companies reducing their electricity usage from Eskom will place immense financial pressure on the utility, which is still over R440 billion in debt. 

Partner and renewable energy expert at BDO, Nato Oosthuizen, said this may result in Eskom entering a death spiral with declining revenue and increased operational costs from an ageing fleet. 

As some of Eskom’s biggest clients, mines and large industrial users, bring large renewable projects online, the utility’s revenue will decline. 

Oosthuizen explained that as the country starts to feel the impact of this progression, a decline in Eskom’s revenue will become increasingly evident, and the trend may accelerate. 

This could spell even tougher financial times ahead for the utility, and some difficult decisions, such as business restructuring and perhaps even retrenchments, may need to be considered, he said. 

Eskom chairman Mteto Nyati has previously said that people mistakenly believe there is a massive move away from the power utility.

“People may wish it is the case. However, the reality is that most businesses expect base load power to come from Eskom,” he said.

There is a move towards renewable energy, like solar PV. However, most of these businesses still rely on Eskom.

Nyati said many South African businesses and industry organisations ask Eskom to present to them.

He explained that many companies are reviewing their planned energy investments, especially in the challenging economic environment, where many have limited funds.

If Eskom can reliably supply electricity to them, they will reconsider their investment in renewable energy projects.

Nyati said many company boards realise that Eskom is the best route if it can supply them with reliable and affordable electricity.

He added that their current priority is to drive down costs at Eskom, which will impact their electricity prices in future.

“We are not pricing ourselves out of the market. We are conscious of the cost and we are increasingly moving into renewable energy,” he said.

Nyati said that as more renewables come online, electricity prices will be driven down, and Eskom will remain competitive.