Eskom in serious trouble

Eskom is facing a significant threat from the declining energy intensity of the South African economy, with households and companies looking to cut their electricity usage or move to alternative generation sources. 

The Council for Scientific and Industrial Research (CSIR) revealed this when it presented its annual report on power generation statistics to the media on Monday, 17 March 2025. 

The CSIR explained that electricity demand continues to trend downwards, with peak demand declining by a few percent each year for the past decade. 

South Africa’s economy used to be dominated by heavy industry, particularly mining, smelting, and manufacturing, which is highly energy-intensive. 

Access to cheap and abundant electricity from Eskom made this possible, giving these industries a global competitive advantage. 

However, things have changed rapidly in the past two decades, with the rising cost of electricity and unreliable supply resulting in declining energy intensity. 

Some of this is also entirely out of Eskom’s hands, with South Africa’s declining energy intensity due to a shift in the economic landscape. 

Over the past two decades, demand for services such as banking, insurance, and light manufacturing has surged in South Africa. 

These sectors typically require far less energy to produce economic value, reducing demand for Eskom’s electricity. 

The CSIR’s data showed that electricity production increased year-on-year in 2024 as private renewable energy projects came online. 

Despite this, demand declined by 3% compared to 2023 as a result of the shift towards less energy-intensive sectors. 

It said the effect of higher electricity prices cannot be discounted, with the national average price of electricity increasing by an annual rate of 11% over the last decade, compared to average headline inflation of around 5%. 

This simply pushes households and companies to use less electricity to save money, resulting in declining demand for energy from Eskom. 

Declining demand for electricity

Declining demand for electricity can also be seen in Eskom’s financial results, which have seen its sales continue on a downward trend for the past decade. 

As the utility’s sales decline, it is forced to increase its prices to make up for the increased cost of producing electricity. 

With large electricity users, such as miners and manufacturers, reducing their operations in South Africa or switching to alternative energy sources, Eskom is effectively 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.

Energy analyst Chris Yelland, managing director of EE Business Intelligence, explained that Eskom’s only option is to reinvent itself. 

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.