Major South African city’s plan to dump Eskom comes at a cost

While municipalities reducing their reliance on Eskom could bring immense benefits to residents, including cheaper electricity prices, it could have far-reaching ramifications for other parts of the country.

This is because Eskom would need to increase its prices to make up for the revenue shortfall it would experience from losing a major municipal client.

Therefore, residents in poorer municipalities that are unable to generate or procure their own electricity would face significantly higher prices to plug the gap.

This is a warning from North West University Professor Jan de Kock, who explained that municipalities looking to reduce their reliance on the state-owned utility is not a new phenomenon.

De Kock’s comments come after the city of eThekwini announced an ambitious strategy to reduce its reliance on the national grid by 40% by 2030.

On 8 August 2025, eThekwini became the first municipality in South Africa to receive approval from the Electricity Minister to procure new electricity generation capacity directly from Independent Power Producers.

This process started when the municipality took a decisive step in 2021 to respond to the national energy crisis. 

The eThekwini Council resolved to initiate its own electricity procurement programme through the Municipal Independent Power Producer Procurement Programme. 

“This decision was driven not only by necessity, but by a forward-looking vision of building a decentralised, diversified, and resilient municipal energy system,” eThekwini Municipality Mayor Cyril Xaba explained.

This programme will allow eThekwini to procure 400 MW of new generation capacity, consisting of 100 MW Solar PV and 300 MW Gas to Power (GTP).

This will not only reduce the municipality’s reliance on Eskom’s often unstable electricity supply but also save an estimated R5 billion over the duration of the Power Purchase Agreements (PPAs), translating to around R250 million in annual savings. 

“These are savings we can redirect to the upgrading of infrastructure for basic services that will directly benefit our residents,” Xaba said.

In addition, this programme is projected to unlock R8.5 billion in private investment and boost regional industrial activity, creating an estimated 2,200 jobs during the construction and operation phases.

“This initiative will also empower small businesses and promote inclusive enterprise and supplier development,” the mayor said. 

“Therefore, this is not an abstract policy document; it is a tangible plan that will bring meaningful change to our communities.”

Winners and losers

De Kock pointed out that eThekwini’s move is nothing new, as several South African municipalities have attempted to do the same in the past.

“Even in Potchefstroom, many years ago, we had our own power station at the site of what is now Snowflake. The pendulum has swung, and now it is swinging back again,” he said.

He explained that, for municipalities, generating their own electricity has distinct advantages for residents, as it enables them to lock in the cost of electricity and link price hikes to inflation.

Eskom’s prices, in contrast, have been hiked above inflation for decades, having risen 1,000% in the past 20 years.

“That stability is a clear benefit to local consumers,” De Kock said, but warned that what is good for one city may be costly for another.

“The downside is that Eskom loses a major client. The cost of generation is then divided among the remaining customers,” he explained. 

“This means that electricity prices for those customers will rise, as they are left to pick up the shortfall. So, while local residents benefit, the rest of the country is left worse off.”

Therefore, while wealthy municipalities may have the luxury of reducing their reliance on Eskom, this risks creating a “patchwork system” where residents in less well-off cities bear higher costs.

“Eskom’s troubles will not vanish simply because cities opt to generate themselves. Indeed, decentralisation could make the utility’s financial headaches worse,” De Kock warned. 

“Yet the politics are inexorable: municipalities will not sit idle while their lights flicker. The pendulum may have swung back, but whether it stabilises – or simply swings again – remains to be seen.”