Social unrest warning in South Africa

Energy analyst Chris Yelland warned that South Africa may experience social unrest in reaction to the high electricity price increases Eskom is looking to implement.

Over the past year, Eskom has significantly improved its performance. The utility’s efforts paid off, as South Africa has been load-shedding-free since March 2024.

However, now Eskom faces a self-imposed threat that could have severe consequences for the utility’s sustainability and the country – sky-high electricity prices.

In 2024, Eskom asked regulator Nersa for permission to raise prices by 36.15% to cover the rising cost of producing electricity. 

Eskom 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% 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.

Nersa has yet to approve Eskom’s request, but it has already been met with significant backlash from both citizens and the government.

In his weekly media briefings, Electricity Minister Kgosientsho Ramokgopa repeatedly cited rising electricity prices as a major problem for the government. 

“Our electricity pricing plan needs to kick in, and that is the primary preoccupation of the ministry now, working with Eskom’s Distribution division and municipalities,” he said. 

Ramokgopa warned that these price increases risk spiralling out of control and that the government’s policy of providing free basic electricity is not working. 

Yelland told Daily Investor that electricity is becoming increasingly unaffordable, which will have severe consequences for the economy. 

“I do worry that, and it has been pointed out by various stakeholders, this could even spill over into social unrest,” he said.

“If they get the kind of price increase that they’re asking for and that they feel they need, it could result in social unrest due to the unaffordability.”

Since 2007, electricity prices in South Africa have risen by 927%. This incredible rise in prices has priced many South Africans out of being able to afford electricity, making the government’s concerns over the provision of free basic electricity all the more pressing.

Raising electricity prices too high can, therefore, also have devastating consequences for Eskom.

While many households made the switch to rooftop solar and other alternative energy sources to avoid Eskom’s power cuts, many also saw it as a way to avoid the utility’s high prices.

This has seen Eskom’s sales steadily decline over the past decade, putting pressure on the utility to raise prices to ensure its revenue growth can cover increased operating costs. 

This can result in a death spiral for the utility, where its raised prices force customers to find alternative energy sources.

“The consequences to Eskom are increasing levels of non-payment by municipalities who can’t collect the money from people that can’t afford to pay and also debt and non-payment,” Yelland warned.

Non-payment is already a significant thorn in Eskom’s side, especially from municipalities.

It was recently revealed that South Africa’s municipalities owed Eskom R95.4 billion by November as they struggled to collect revenue from customers. Available funds are also sometimes misappropriated after years of mismanagement. 

Eskom chairman Mteto Nyati warned in the utility’s annual report that the billions that South African municipalities owe Eskom are hindering its plan to restructure and separate its distribution unit.

Eskom completed the unbundling of its transmission business last year, a major step in the process of restructuring and splitting the utility into three units. That means the focus now turns to the separation of the distribution arm. 

“The municipal debt challenge has the potential to jeopardize the distribution separation as well as threaten the financial viability and sustainability of the future distribution industry,” Nyati said.

Yelland said one way to address this problem is by restructuring the country’s electricity supply industry.

This would involve opening up the sector to suppliers other than Eskom, establishing a free market. This would ensure that prices are determined by the market and not by one supplier and the regulator.