Hidden threat to Eskom
Eskom faces a significant threat from declining electricity demand in South Africa, with its historically energy-intensive economy shifting towards low-energy services.
This is feedback from energy analyst and managing director of EE Business Intelligence Chris Yelland, who explained that Eskom’s sales are not only under pressure from households and companies switching to alternative energy sources.
Yelland told Daily Investor that Eskom’s sales have been under pressure for over a decade due to a variety of factors.
The utility’s sales have steadily declined as the South African economy has slowed down and the price of electricity has gone up.
These factors have combined to result in South Africa’s energy intensity declining. This means that it now takes less energy to create a unit of GDP in 2025 than it has previously.
Historically, the South African economy was dominated by energy-intensive industries such as mining, quarrying, smelting, and heavy manufacturing.
This was driven by the extremely cheap electricity Eskom was able to supply, giving South African mineral and manufacturing exports a competitive advantage in the global marketplace.
The decline in South Africa’s energy intensity is due to a shift in the economic landscape and the rising price of electricity, which is making energy-intensive industries economically unviable.
Yelland said the past two decades have been characterised by a shift away from mining-heavy manufacturing in South Africa to services such as banking and insurance and light manufacturing.
These industries require far less energy to produce economic value, thereby reducing demand for Eskom’s services.
A case example of this shift is the looming closure of ArcelorMittal’s longs steel business, as the company says it is no longer economically viable.
An industry once built on cheap and abundant electricity has been shown to be no longer economically viable, Yelland said.
With these large electricity users reducing their operations in the country and, in some cases, shutting down, Eskom is faced with a declining customer base.
This threatens the utility’s economic viability as many of these consumers are not only heavy electricity users but also good customers in the sense that they pay on time and are reliable.
If they are no longer customers of the utility, then Eskom risks being left with relatively smaller users of electricity who are unreliable when it comes to paying the utility.

Yelland said this will force Eskom to reinvent itself to remain competitive as South Africa marches towards a competitive electricity industry.
He explained that the company will have to become vastly more efficient and reduce its operation costs to compete with new technologies that are cheaper.
“We are busy creating a competitive electricity market. There is a new Electricity Regulation Act which allows for an open market and that is going to be the new playing field,” he said.
“The whole intention is to take away the Eskom monopoly because it is failing us. We can see Eskom losing its monopoly and its 95% share of the generation market.”
Yelland said the future electricity generation industry is likely to be made up of Eskom’s generation unit alongside a mix of municipalities, businesses, and households generating their own electricity.
“The future of electricity generation is a diversified, competitive sector, and Eskom is going to lose market share. That is good because, at the moment, the risk is too high, and Eskom is failing us.”
Yelland said that Eskom will not completely disappear as it retains some advantages over new players, particularly its ability to provide large consumers with electricity.
The utility will have to retain its existing customers, such as mines, smelters, and heavy industry while trying to attract new consumers where it has a clear advantage.
Unfortunately, the slimming down process at Eskom to make it more efficient and competitive will not come without casualties.
Partner and renewable energy expert at BDO South Africa Nato Oosthuizen explained that this will come with job cuts.
Oosthuizen said that Eskom’s declining sales are bound to impact its revenue at some point in the future, and massive tariff increases to make up the revenue shortfall are unsustainable.
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’s declining electricity production and share of the total market can be seen in the graph below, courtesy of Nedbank’s economics unit.

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