SANDTON, SOUTH AFRICA – JUNE 14: Eskom CEO Phakamani Hadebe during the National Union of Mineworkers (NUM) and (National Union of Metalworkers Union of South Africa (NUMSA) members protest at Eskom’s Megawatt Park, demanding salary increases on June 14, 2018 in Sandton, South Africa. Both unions have rejected Eskom’s proposed 0% wage offer and are demanding a 15% wage increase across the board and R2, 000 housing allowance increase, among other demands.(Photo by Gallo Images / Netwerk24 / Deaan Vivier)
Rising electricity tariffs: Eskom needs to settle R600 billion debt by 2022
Eskom supplies 90% of the country’s power.
SANDTON, SOUTH AFRICA – JUNE 14: Eskom CEO Phakamani Hadebe during the National Union of Mineworkers (NUM) and (National Union of Metalworkers Union of South Africa (NUMSA) members protest at Eskom’s Megawatt Park, demanding salary increases on June 14, 2018 in Sandton, South Africa. Both unions have rejected Eskom’s proposed 0% wage offer and are demanding a 15% wage increase across the board and R2, 000 housing allowance increase, among other demands.(Photo by Gallo Images / Netwerk24 / Deaan Vivier)
South Africa’s national power supplier, Eskom, is suffocating under the weight of rising debts. In order to lighten the load, citizens can expect to pay much more for electricity in the next few years.
To say Eskom is in serious trouble would be an understatement.
Eskom: Coal shortages, protests and bailouts
Financially, the company is only being kept afloat by government hand-outs to the value of R350 billion – without repeated bailout plans, operations would grind to a halt, plunging 90% of South Africa into darkness.
Worse still, is that half of Eskom’s power plants have less than a month’s supply of coal in stock. A Gupta-deal gone wrong has landed Eskom in a dire predicament, whereby the power utility has had to run back to former coal suppliers, cap-in-hand.
According to Business Day, Eskom currently owes around R387 billion in debt. This amount is set to rise up to R600 billion within the next four years.
The power supplier has also been crippled by consecutive wage disputes which have led to industrial action, including sabotage to the already unstable electricity grid.
Price of electricity going up
The practical implications of Eskom’s failing finances point to South Africans having to dig deeper into their already burdened pockets and cough up more cash for electricity.
Moneyweb reports that in order for Eskom to remain afloat, it will need to increase its electricity tariffs by 45% over the next three years – that’s a 15% annual increase.
Some analysts believe this to be a conservative underestimate. Energy analyst, Ted Blom, commented on the power crisis facing South Africa, noting that at this stage, the energy supplier’s debt is unmanageable, saying:
“By 2019/20 financial year expect a 30% electricity hike, followed by 50% the following year and 30% the other year. This is a reality. Eskom over the past 10 years has come out with a high tariff raising strategy which has enabled them to fleece the country’s economy of some R1.3 trillion.”
Even Eskom chairman, Jabu Mabuza, told parliament that it would have a hard time repaying debts, saying:
“We are unable to finance our finance costs. This means we really have to unpack our operating model going forward, looking at reducing costs and increasing revenue.”
One of these cost-cutting methods touched on by Mabuza, includes trimming Eskom’s bloated workforce – although Unions have already warned of further protest action should the utility seek to retrench.
