South Africans kiss Eskom goodbye

South African households and businesses continue to turn away from Eskom to use more affordable alternatives for generating energy and are becoming increasingly energy efficient. 

This is impacting Eskom’s electricity sales, with its latest annual financial results showing that its sales declined by 3% in the 2024 financial year. 

Despite its operational improvement since the end of March 2024, with South Africa not experiencing load-shedding since then, the utility’s sales remain under pressure. 

Energy analyst and managing director of EE Business Intelligence Chris Yelland explained to Daily Investor that the amount of energy generated by Eskom has declined significantly while overall demand has remained flat. 

This indicates that South Africans are using less of the utility’s electricity, preferring instead to use alternative energy sources or increase their energy efficiency. 

The decline in Eskom’s sales has been a decades-long phenomenon that has accelerated recently with intense load-shedding and steep electricity price increases. 

Load-shedding provided the initial push for households and companies to invest heavily in rooftop solar and other alternatives for the sake of energy security. 

Yelland said back then, there was no real economic case for installing solar and backup batteries as there was little return on investment. 

However, with electricity prices increasing over the past few years and more hikes set to come, alternative sources are becoming increasingly attractive economically.

“You would expect with a growing economy, albeit slowly, and a growing population that electricity sales would increase with demand,” Yelland said. 

This is not the case in South Africa. While the population has grown, total electricity demand has remained fairly consistent. 

Yelland explained that this is due to several factors, including a shifting economic landscape and households becoming more energy efficient. 

As the South African economy continues its shift away from energy-intensive industries such as mining and manufacturing towards services, overall demand will come under downward pressure. 

Households and companies have also implemented various strategies to reduce their energy usage, such as using LED lightbulbs, gas stoves and heaters, and fewer energy-intensive appliances. 

The key driver behind all of this is the price of electricity, which has skyrocketed in the past 15 years. 

A higher electricity price from Eskom makes energy-intensive industries less economically viable in South Africa, forcing many to reduce their operations or shut down completely. 

This results in lower sales, and with households using less electricity from Eskom, the utility finds itself in a precarious position. 

As its sales decline and the cost of producing electricity increases, Eskom is forced to raise prices to cover its costs and make up for the revenue shortfall. 

Yelland explained that electricity demand is very sensitive to price increases, and as the price rises, demand declines. 

“When you sell less of your product but want to make the same amount of money to cover your costs, you have to put the price up. But then, demand goes down again, so you get this vicious cycle,” he said. 

“We are not out of this vicious cycle. We are in the middle of it, with Eskom continuing to ask for above-inflation increases each year. So yes, they are in a kind of death spiral.”

This trend has continued in the first quarter of Eskom’s current financial year, ending 31 March 2025. 

An update to Parliament on the utility’s performance so far in the 2025 financial year revealed a much improved financial performance, with less load-shedding and lower diesel usage, saving the company billions of rands. 

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. 

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.