Eskom's Improved Performance Undermined by Declining Sales and Surging Tariffs Amidst Financial Struggles

Eskom, once the cornerstone of South Africa's electricity supply, is now at a crossroads, having solved the persistent problem of load-shedding, only to face an unprecedented decline in electricity sales and a daunting financial predicament in 2025. With the national utility’s power production falling to levels last seen in the early 2000s, alternative energy sources are diversifying the electrical landscape and eroding Eskom’s market share.

The 2024 operational turnaround, while commendable, has seen Eskom’s total sales dwindle, dropping by 1 terawatt-hour (TWh) in the first quarter of the 2025 financial year compared with the previous year. Nedbank economist Isaac Matshego contextualizes the scenario, predicting further decline as independent power production gains traction.

This transition, however, presents an advantage to the South African economy, enhancing the robustness of the electricity infrastructure and decreasing dependency on Eskom. Economists like Matshego praise alternative energy for its competitive pricing, which catalyzes business growth by reducing inflationary pressures.

Moreover, the shift towards renewable energy is a strategic response to environmental exigencies, with South Africa's trade allies contemplating carbon taxes on imports. A compelling motive as over 85% of Eskom's generation relies on coal, prompting businesses to pivot towards greener energy solutions to stay competitive on the international stage.

But this evolving power dynamic places Eskom in a precarious position; as revenue contracts, the utility counters with tariff increments, a move resulting in a 15% revenue uptick against reduced sales volume. This pressure to increase prices may exacerbate an already dire situation.

Analysts and former executives, including ex-CEO Andre de Ruyter, signify red alerts, suggesting a potential financial death spiral for Eskom. Small-scale renewables adoption is leaving the utility with a residual demographic of non-paying customers and municipalities, while more solvent ones are driven to cost-effective solar photovoltaic systems, further weakening Eskom’s economic health.

Renewable energies, particularly solar, come into play not only as a load-shedding countermeasure but also a cost-saving long-term investment. For instance, Harmony Gold sees a projected savings of R425 million annually courtesy of solar power—illustrative of a broader corporate movement toward energy independence and cost efficiency.

Eskom's financial distress, compounded by a R445 billion debt, is aggravated by persistent non-payments from municipalities. With municipal debt mountaineering to R80 billion, increasing by nearly R2 billion monthly, CFO Calib Cassim’s outlook is somber, claiming that if heightened debt continues, the government's R254 billion debt relief plan for Eskom will be rendered ineffective.

The transformation during the Mbeki era’s ANC gambit on free electricity, power station expansion avoidance, and electricity price hikes has now backfired. The unforeseen outcome is a significant exodus leaving the monopolistic behemoth grappling with progressing isolation from financially able consumers.