Eskom financial disaster is now South African taxpayers’ problem

Eskom’s deteriorating financial health has significantly impacted the state’s finances over the past decade, resulting in approximately R400 billion worth of fiscal transfers from taxpayers. 

Despite this, the company’s debt burden remains unsustainable and is hovering close to 6% of the country’s total GDP. 

As a result, the utility is likely to need additional government support in the years to come if its financial performance does not improve following some operational improvements. 

However, even with additional financial support and improved operational performance, the company has still not been able to adequately invest for the future. 

This is feedback from the Organisation for Economic Co-operation and Development (OECD), which outlined Eskom’s poor financial health in its recent economic survey on South Africa. 

Eskom’s deteriorating financial health has undermined its capacity to undertake the necessary investment to become economically viable, the OECD said. 

This has led to a decade of underperformance from its coal-fired power stations and inadequate new capacity being brought online.  

The deteriorating operational performance, characterised by periods of load-shedding, has resulted in severe financial difficulties for the utility. 

Its credit rating has sunk to “a speculative” grade, limiting its borrowing capacity even further, and forcing the government to implement successive bailouts. 

Big fiscal transfers from the central government have been required to ensure the financial survival of the utility company, weighing on public finances. Eskom’s debt burden represents 15% of government debt and around 8% of GDP. 

To restore Eskom’s financial stability, the Eskom Debt Relief Act, passed in June 2023, covers R254 billion (5.5% of GDP) of Eskom debt (including R168 billion in capital and R86 billion in interest) over the next three years. 

The strict bailout conditions include a moratorium on further borrowing, with new debt or government guarantees subject to the National Treasury’s approval. 

The strict conditionality imposed through the moratorium on new debt is intended to secure public funding. 

However, the OECD stated that the arrangement risks hindering the deployment of investment in supply security, as well as the green transition of the electricity supply sector. 

The graph below illustrates the repeated taxpayer-funded bailouts Eskom has received since 2009, as well as its unsustainable debt burden. 

Eskom shooting itself in the foot

Despite the urgent need to improve the utility’s finances, Eskom’s skyrocketing electricity tariffs are pushing some of its consumers to seek out alternative sources of energy. 

This has created a vicious cycle, where Eskom has significantly increased its prices to deal with rising losses while being unable to ensure an adequate electricity supply.

These price increases, in turn, prompt customers to use alternative energy sources and reduce their reliance on Eskom, which impacts the utility’s sales. 

Rooftop solar installations more than doubled in South Africa at the height of load-shedding in 2023 but have slowed sharply as Eskom’s operational performance improved.

With load-shedding seemingly near its end, some questioned whether it was necessary to install alternative energy sources. 

However, South Africans are again turning to solar power due to elevated electricity prices.

The rising price of electricity has made solar installations, in particular, far more economically viable, with consumers turning to them to reduce their monthly electricity bills.

The executive head of Standard Bank LookSee, Marc du Plessis, explained that the platform has seen rising interest in solar installations since July 2024 as municipalities rolled out their annual hikes. 

Du Plessis said LookSee expects this trend to continue as households look for sustainable ways to protect their budgets.

“We continued to see a steady increase with additional spikes in interest following reports that Eskom would continue asking for another significant increase in electricity tariffs.” 

This renewed interest tripled the average number of visits to LookSee’s Solar Loan finance page. 

Du Plessis explained that while the price of electricity from Eskom is rising, the price of installing a solar system is coming down in some cases. 

Lower component prices and enhanced finance options have improved the affordability and accessibility of residential solar installations, driving increased demand. 

“With demand at more manageable levels, we have seen the cost of components dropping by up to as much as 30% since the beginning of 2025.”

This all translates into lower sales for Eskom, with residential sales volumes declining by over 20% in the past decade. Overall, the utility’s sales volumes have declined by just over 15% over that period.