Eskom’s R840 million ghost town

Eskom spent R840 million building the now-abandoned Wilge Residential Village near Kusile Power Station in Mpumalanga, and efforts to sell the property have been unsuccessful. 

The property development was intended to house the workers of Kendal and Kusile power stations in its 336 apartments. 

DA MP and spokesperson for electricity and energy, Kevin Mileham, recently visited the abandoned site on an oversight visit. 

Mileham said the site had been abandoned for so long that bags of unused cement had hardened in the weather, and the development now resembles a ghost town. 

The 336 apartments, designed for families, have been left abandoned for over a decade as Kusile’s construction was beset by delays and cost overruns. 

Eskom spent millions temporarily housing workers over 50 kilometres away from the power stations, providing busses to take them to work and back every day. 

The utility said at the time it had appointed attorneys to conduct an investigation into allegations of corruption, fraud, and financial irregularities in the project. 

Mileham explained that the units were first budgeted at around R770,000 per unit but had soon ballooned to over R2.5 million per unit. 

In 2021, Eskom abandoned the Wilge Residential Village and presented a plan to Parliament to sell it to the Department of Human Settlements. 

It also said it would recover R78.4 million from the former project manager. Mileham said no progress has been made on either of these counts. 

“What we have seen here today is absolute disrepair, dilapidated buildings, falling fences, and broken windows,” Mileham said. 

“This is R840 million of your money that Eskom has wasted, and you have now been asked to pay for it again via price increases.” 

Mileham was referring to Eskom’s request to Nersa for a 36.15% increase in electricity tariffs to cover the rising cost of producing electricity. 

Eskom has requested total revenues of R446 billion for the 2026 financial year, R495 billion for 2027, and R537 billion for 2028.

The proposed average price hikes for Eskom’s direct customers are 36.15% for the period from 1 April 2025 to 31 March 2026.

For the subsequent years, the utility is seeking increases of 11.81% from 1 April 2026 to 31 March 2027 and 9.10% from 1 April 2027 to 31 March 2028.

Electricity prices in South Africa have risen by 927% since 2007, when the utility began its ambitious project of building the Medupi and Kusile coal-fired power stations. 

In a recent analysis, Reserve Bank economists Zaakirah Ismail and Christopher Wood identified key factors behind rising electricity tariffs.

Their findings indicate that Eskom’s need for additional cash to cover escalating finance costs – which have more than doubled in the past decade – has been a major contributor to these increases. 

These soaring costs stem from mismanagement and inefficient capital allocation. Between 2007 and 2021, Eskom spent R680 billion with little improvement in performance.

During this period, Eskom undertook significant projects, including reactivating three ageing power stations, developing two peaking plants, and constructing two large new power stations, Medupi and Kusile. 

However, substantial cost overruns on the latter projects added heavily to Eskom’s debt. By the end of the 2022 financial year, Eskom’s finance costs had reached R44 billion, well above inflation.

Eskom’s pricing model links electricity rates to its costs, meaning years of mismanagement and emergency spending have been passed on to consumers.

Ismail and Wood pointed out that Eskom’s growing debt-servicing requirements are the main reason electricity prices are rising faster than inflation.

Electricity Minister Kgosientsho Ramokgopa echoed these insights, noting that system inefficiencies or “leakages” also contribute to higher electricity production costs. 

“There is leakage. There is malfeasance. Someone must pay for that. Over the period, it was the end consumer that was paying for that,” he stated.

Partner and renewable energy expert at BDO South Africa Nato Oosthuizen explained that this increase is due to Eskom’s dire financial situation.

Eskom is currently in debt of R445 billion and pays around R40 billion a year to service it. This significantly increases the utility’s operating cost. 

This is a direct result of historic mismanagement at the utility, with its capital being allocated poorly over the past decade, with the Wilge Residential Village project being only one example. 

Thus, the increase in electricity is not necessarily due to the rising price of actually producing electricity by burning coal or other means – it is due to the inefficiency of Eskom as a company. 

This is only set to get worse in the coming years, as Eskom’s revenue shortfall has reached a cumulative R535 billion and households and companies continue to move away from using its product. 

Daily Investor reached out to Eskom for comment, but the utility did not respond by the time of publication. Once received, Eskom’s response will be added.

Eskom’s ghost town in photos

The below images are of Eskom’s Wilge Residential Village, courtesy of the DA.