Social unrest warning in South Africa over electricity price hikes by SETH THORNE

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2025-01-02 at 18:33 #458978
Nat Quinn
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Minister of Energy and Electricity, Dr Kgosientsho Ramokgopa, has warned that municipal debt is an “existential problem” facing South Africa – and steep increases in the cost of electricity are a ticking time bomb that could trigger “unrest” and undermine the government.

Speaking at the latest Energy Action Plan, Ramokgopa touched on wide-ranging issues including energy milestones such as the improved performance of Eskom’s power stations which has resulted in over 200 days of no load shedding, along with their plan to reach a 70% energy availability factor.

However, he emphasised that a major inhibitor of the utility meeting its goals is a mounting municipal debt problem – but some of the plans to tackle it may not see its desired result.

Eskom recently revealed that 75 municipalities owe it more than R92 billion in unpaid electricity bills — a staggering R19 billion increase since March 2024.

Ramokgopa said that the debt problem is largely due (but not limited) to a large proportion of South Africans experiencing poverty and, therefore, being unable to afford the price of electricity.

The minister explained that “the great majority” of South Africans “can’t pay” for the price of electricity, while pensioners specifically are hit the hardest.

He explained that the average cost of electricity for low-income households is R1,200, while pensioners earn R2,190; so after paying for electricity, the pensioners lose half of their income.

Ramokgopa discussed the problems associated with tariff increases.

Eskom has applied for large price hikes through 2027, which will effectively see prices climb 66% over the period.

This includes:
- 36.15% on April 1, 2025;
- 11.91% on April 1, 2026;
- 9.1% on April 1, 2027.
The main drivers of Eskom’s request for price increases were said to be the cost of primary energy, operating costs, the cost of independent power producers (IPPs), international purchases and depreciation.

However, Ramokgopa warned about its implications as he believes that the proposed increases are “unsustainable” and if left unaddressed, will create a “perfect storm that can undermine a legitimate government,” ultimately becoming a “national security problem“.

He said that any tariff increase, “whether it’s 10 it’s 15 it’s 30 it’s 36 really they still can’t afford what is before them,” and states that the government is “pushing them deeper and deeper into conditions of poverty”.

The minister said that the government needs to find a new solution to this problem, saying that it is irresponsible of the government to demand payment from people experiencing poverty.

Ramokgopa explained that he feels “confident” that the National Energy Regulator of South Africa (Nersa) “will not” increase the tariff by 36% and believes that “we must find new ways” to bring relief to South African households, instead of forcing them to pay unaffordable electricity rates.

“We feel their pain we hear their cries we understand their anger we will resolve this problem I give them the assurance,” said Ramokgopa.

Nersa said last week that it expected to make a final decision on the tariff increases by the end of January 2025.

Backlash to proposals

Since the announcement of the proposed increases, there has been a chorus of warnings in regard to the tariffs.

The Organisation Undoing Tax Abuse (OUTA) has argued that Eskom’s application inadequately addresses cost inefficiencies, provides an outdated economic impact study, and fails to consider the severe societal consequences of such a large price hike.

Energy expert and OUTA advisor Chris Yellend noted that this comes after 15 years of above-inflation price increases, and Eskom’s focus remains on achieving cost reflectivity through revenue and price hikes – which OUTA argued is unsustainable.

OUTA expects Eskom’s proposed price increases to hurt various stakeholders and said that households, especially those with lower incomes, will struggle with higher costs, while SMMEs and the broader business community may face financial strain that hinders growth.

Municipalities and electricity distributors could find it challenging to maintain service delivery. Additionally, the agricultural, manufacturing, and energy-intensive sectors are at risk of reduced competitiveness and potential job losses.

SOURCE:Social unrest warning in South Africa over electricity price hikes – BusinessTech
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Minister of Energy and Electricity, Dr Kgosientsho Ramokgopa, has warned that municipal debt is an “existential problem” facing South Africa – and steep increases in the cost of electricity are a ticking time bomb that could trigger “unrest” and undermine the government.

Speaking at the latest Energy Action Plan, Ramokgopa touched on wide-ranging issues including energy milestones such as the improved performance of Eskom’s power stations which has resulted in over 200 days of no load shedding, along with their plan to reach a 70% energy availability factor.

However, he emphasised that a major inhibitor of the utility meeting its goals is a mounting municipal debt problem – but some of the plans to tackle it may not see its desired result.

Eskom recently revealed that 75 municipalities owe it more than R92 billion in unpaid electricity bills — a staggering R19 billion increase since March 2024.

Ramokgopa said that the debt problem is largely due (but not limited) to a large proportion of South Africans experiencing poverty and, therefore, being unable to afford the price of electricity.

The minister explained that “the great majority” of South Africans “can’t pay” for the price of electricity, while pensioners specifically are hit the hardest.

He explained that the average cost of electricity for low-income households is R1,200, while pensioners earn R2,190; so after paying for electricity, the pensioners lose half of their income.

Ramokgopa discussed the problems associated with tariff increases.

Eskom has applied for large price hikes through 2027, which will effectively see prices climb 66% over the period.

This includes:

36.15% on April 1, 2025;

11.91% on April 1, 2026;

9.1% on April 1, 2027.

The main drivers of Eskom’s request for price increases were said to be the cost of primary energy, operating costs, the cost of independent power producers (IPPs), international purchases and depreciation.

However, Ramokgopa warned about its implications as he believes that the proposed increases are “unsustainable” and if left unaddressed, will create a “perfect storm that can undermine a legitimate government,” ultimately becoming a “national security problem“.

He said that any tariff increase, “whether it’s 10 it’s 15 it’s 30 it’s 36 really they still can’t afford what is before them,” and states that the government is “pushing them deeper and deeper into conditions of poverty”.

The minister said that the government needs to find a new solution to this problem, saying that it is irresponsible of the government to demand payment from people experiencing poverty.

“We feel their pain we hear their cries we understand their anger we will resolve this problem I give them the assurance,” said Ramokgopa.

Nersa said last week that it expected to make a final decision on the tariff increases by the end of January 2025.

Backlash to proposals

Since the announcement of the proposed increases, there has been a chorus of warnings in regard to the tariffs.

The Organisation Undoing Tax Abuse (OUTA) has argued that Eskom’s application inadequately addresses cost inefficiencies, provides an outdated economic impact study, and fails to consider the severe societal consequences of such a large price hike.

Energy expert and OUTA advisor Chris Yellend noted that this comes after 15 years of above-inflation price increases, and Eskom’s focus remains on achieving cost reflectivity through revenue and price hikes – which OUTA argued is unsustainable.

OUTA expects Eskom’s proposed price increases to hurt various stakeholders and said that households, especially those with lower incomes, will struggle with higher costs, while SMMEs and the broader business community may face financial strain that hinders growth.

Municipalities and electricity distributors could find it challenging to maintain service delivery. Additionally, the agricultural, manufacturing, and energy-intensive sectors are at risk of reduced competitiveness and potential job losses.

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