Eskom's Financial Struggles Continue Despite Reduced Load-Shedding

Eskom, South Africa’s state-operated power utility, is facing dwindling sales volumes as more consumers move away from its grid, opting for alternative energy sources. The shift comes even after the company reported a dramatic decrease in load-shedding over the last half-year, as well as a significant improvement in its financial performance.

A performance update presented to the Parliament's Standing Committee on Public Accounts (Scopa) highlighted that, while power cuts ceased for six consecutive months, the first quarter of the 2025 financial year saw a reduction in company and household reliance on Eskom. The pretax loss for the quarter was substantially lower at R200 million compared to a staggering R6.7 billion the previous year.

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Despite the improvement, Eskom's history of loss continues to be a concern. The company last saw profit in 2016, and since then, it has been accumulating substantial debt, currently standing at R445 billion. However, savings from a 70% year-on-year decline in diesel expenditure for its Open-Cycle Gas Turbines (OCGTs) and the improved Energy Availability Factor (EAF) have allowed Eskom to downsize their debt by R8.1 billion and narrow its pretax loss.

Eskom's revenue rose by 15%, but with sales volumes decreasing by 1 TWh, it's apparent that higher tariffs are driving the revenue, not increased consumption. South Africans now face electricity costs that are five times higher than what they were in 2010, prompting many to switch to options like rooftop solar panels to avoid further escalations in price.

Former Reserve Bank deputy governor Kuben Naidoo suggested that the lack of recent load-shedding might be due to a drop in demand from sectors like mining and manufacturing. Massive renewable energy projects by mining companies and large industries could endanger Eskom's financial stability, as suggested by renewable energy expert Nato Oosthuizen from BDO.

Eskom Chairman, Mteto Nyati, acknowledged the shift towards renewable energy but maintained that many businesses continue to see Eskom as the main provider of base load power. Nyati stressed that if Eskom can supply reliable and cost-effective electricity, it would influence companies' investment decisions in renewable projects. He assured that lowering Eskom's operational costs is a priority that will influence future prices and that the incorporation of more renewable sources will play a role in keeping Eskom competitive in the energy market.