With Eskom’s latest increase, electricity costs have soared by 77.5% since 2022. Consumers and businesses struggle as the financial burden deepens.
As Eskom’s annual increase of 12.7% bit deeply into household budgets yesterday – with the reality of a shocking 77.5% hike in power prices in just five years – Electricity Minister Kgosientsho Ramokgopa wants even more.
He is asking for another R440 billion, or 20% of South Africa’s gross domestic product, to expand the grid.
The National Energy Regulator of South Africa (Nersa) last month approved Eskom’s hike request: direct customers will pay a 12.7% increment until 31 March next year, while municipal customers will face an 11.32% increase starting on 1 July.
Staggering electricity hike
The increase is the first in a three-year staggered increase granted to Eskom by Nersa in January.
Little consolation can be taken from Nersa having rejected Eskom’s initial application, as by 2027, the compounded increase will be comparable to the 32% requested.
Heaping on a value-added tax (VAT) increase to boot, the gradual increases chip away at every household’s disposable income, delivering bad news in a slow drip that does not abruptly shock ratepayers into action.
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However, when comparing electricity costs from just three years ago, households will be paying 77.5% more in 2027 than they were in 2022, by the time this cycle of increases is completed.
A R1 000 bill from 2022 will cost more than R1 500 after yesterday’s hike and R1 775 by 2027 when adding in the VAT increases.
For a large household that spent R60 000 a year on electricity in 2022, the equivalent cost in 2027 will be at least R106 510, all increases considered.
More difficult for consumers to afford basic necessities
Zinhle Tyikwe, CEO of the Consumer Goods Council of SA, warned the shrinking disposable income would make it more difficult for consumers to afford basic necessities.
“Consumers are already grappling with rising living expenses and this latest increase is yet another blow to household incomes – just as they were beginning to feel the benefits of recent interest rate cuts.
“Eskom must improve its operational efficiency to lower energy production costs, particularly by investing in renewable sources. Increasing generating capacity and plant availability will go a long way in reducing expenses,” Tyikwe said.
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Ramokgopa’s ambitious Independent Transmission Programme is aimed at attracting private sector investment to expand the country’s electricity grid.
He described it as a “step change” in addressing the nation’s ongoing energy challenges.
The programme will facilitate private sector participation in developing more than 1 100km of new transmission lines across three provinces, potentially unlocking over 3 200 megawatts of additional power generation capacity.
‘Step change’ in addressing energy challenges
South Africa’s renewable energy potential remains largely untapped due to transmission limitations, particularly in the Northern Cape, Eastern Cape and Western Cape, he said.
“We have exhausted all of the transmission that allows us to evacuate the electrons so that the economy can benefit from those assets. For as long as we don’t do this capacity expansion, we will not realise that ambition.”
The government would secure necessary environmental impact assessments and rights of way, including using expropriation where necessary, to ensure projects can proceed without delays, Ramokgopa said.
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Business Unity SA’s energy and environment director Happy Khambule said the tariff hikes will hurt businesses.
“Electricity is a fundamental input cost and this increase will inevitably impact production expenses and the overall cost of doing business.”
“Whether you’re manufacturing goods or delivering services, electricity is essential – especially in a highly digitised economy. The cost of doing business is going to increase. At some point, many of the goods and services we rely on will become more expensive,” Khambule said.
Hikes will hurt businesses
“Manufacturing requires a lot of electricity and businesses in this sector face tough decisions. They might increase the prices of their products, delay expansion plans, or postpone capital investments in new production technologies, just to offset these higher costs.”
“That has a direct impact on creating jobs and, therefore, the economy.”
