After years of lurching from disaster to disaster, Eskom, the embattled South African electrical energy utility, lastly had one thing to have fun final month when it introduced an annual pre-tax revenue of R23.9bn ($1.4bn). This marks the primary time in eight years that the state-owned firm has been within the blac
“Following years of constrained efficiency, we’re starting to see the tangible advantages of our restoration methods, with marked enhancements throughout key monetary metrics,” mentioned Eskom’s chief monetary officer Calib Cassim.
Eskom, like different state-owned utilities, has been mired in numerous corruption and mismanagement scandals for a few years (one former CEO even claims to have been focused in a homicide plot). Amid more and more disastrous energy cuts, identified domestically as loadshedding, President Cyril Ramaphosa launched ‘Operation Vulindlela’ – that means “clear the way in which” – in 2020 in an effort to reform utilities. The federal government additionally appointed a brand new board for Eskom in 2022, bringing better technical experience.
After losses of R34.6bn ($2bn) in 2023 and R25.5bn ($1.5bn) in 2024, the turnaround efforts now seem like bearing fruit. Loadshedding has dropped dramatically during the last 18 months as breakdowns at coal-fired energy stations have subsided, permitting Eskom to scale back prices by relying much less on costly diesel mills.
However a frightening set of challenges nonetheless stay.
Encouraging restoration
Eskom’s capacity to return to revenue rests on a number of components.
Connor Vasey, director at advisory agency J.S. Held, says “by far the largest contributor” to Eskom’s revival has been the federal government’s determination to assist the parastatal relieve its debt burden. After a number of bailouts courting again 15 years, Ramaphosa introduced a five-year debt aid programme in 2023.
“That massively lowered financing prices for the utility and mainly created the area for all different interventions,” Vasey says.
He notes, for instance, that it might not have been attainable for Eskom to finance a serious upkeep programme in 2023 with out having first secured debt aid from the federal government. This programme bore fruit the next 12 months, when outages at Eskom’s fleet of coal-fired energy stations dramatically lowered.
In accordance with Eskom, loadshedding happened on simply 13 days within the 2025 monetary 12 months (ending in March), in contrast to an enormous 329 days over the earlier 12 months.
The federal government has now began to scale-back its debt aid programme, in gentle of Eskom’s improved monetary efficiency. Within the nationwide price range in March, the Treasury estimated debt aid for Eskom would whole R230bn ($13.2bn) over the interval, about R24bn ($1.38bn) lower than initially anticipated.
In the meantime, Eskom itself credit a greater than 12% hike in electrical energy tariffs as key to its improved monetary efficiency. The utility has spent years lobbying NERSA, the regulatory physique that units costs, to conform to tariff will increase.
Kimera Chetty, lead advisor at consulting firm Africa Apply, says the improved efficiency is all the way down to “political will coupled with sustained coordination throughout a number of actors to regular the ship”.
Debt aid and lowered loadshedding, together with improved administration and governance, have made a “decisive distinction”, she says. However Chetty factors out that round half of Eskom’s pre-tax revenue got here because of a tax settlement with the South African Income Service, which allowed it to obtain rebates that had beforehand been disallowed on diesel funds from earlier years.
And Eskom nonetheless has a protracted option to go on bettering governance, she provides, with auditors pointing to ongoing issues.
“When you strip out the one-off tax profit, the revenue is smaller. The audit opinion remains to be certified, which tells you inside controls and reporting haven’t totally recovered. Plant efficiency has improved, but it’s not at goal, and the system stays fragile. Numerous the income elevate has come from steep tariffs which might be robust on households and companies.”
“I’d name this a reputable first step, not mission completed,” says Chetty.
Debt complications
In addition to Eskom’s ongoing dependence on authorities assist and elevated tariffs, the obvious cloud on the horizon for the utility is the truth that municipal governments are failing to pay their payments.
In South Africa, energy customers usually pay electrical energy payments to municipal governments, that are then purported to pay Eskom in bulk. In apply, the system has more and more damaged down throughout massive elements of the nation. Jee-A van der Linde, senior economist at Oxford Economics Africa, notes that arrears from municipalities have elevated by some 27% within the final monetary 12 months and now stand at R94.6bn ($5.54bn). It’s a drawback, he says, that poses “critical dangers to South Africa’s future power panorama”.
Of the nation’s 257 municipalities, 71 are included in a debt aid programme arrange two years in the past. This enables the municipalities to have their money owed to Eskom written-off by the nationwide authorities, offering they pay their present payments on time. In apply, nonetheless, few have been capable of meet this situation.
Eskom’s wrestle to gather income does, after all, pose a basic menace to its viability.
“If a big share of the shopper base doesn’t pay, the mannequin breaks,” says Chetty. The utility is making an attempt to maneuver extra electrical energy customers onto pre-paid meters, which permit it to disconnect electrical energy provides if the shopper fails to pay. The meters are additionally purported to make it simpler for Eskom to detect theft and unlawful connections.
But the success of those efforts stays unsure amid a troubled preliminary rollout. In asserting its newest monetary outcomes, Eskom itself acknowledged that unpaid payments, together with its dependence on authorities assist, imply “there may be materials uncertainty relating to Eskom’s going concern standing”.
Wider implications
Each South Africa is greater than conscious of the harm to the broader economic system attributable to the collapse of Eskom’s operational efficiency in the course of the loadshedding years. At its peak in 2023, blackouts value the nation nearly R3tr ($174bn) in misplaced output, in accordance with estimates by the Council for Scientific and Industrial Analysis.
Whereas the restoration in Eskom’s operational and monetary efficiency is sweet information for the economic system total, it has come at the price of considerably elevated electrical energy costs. With the most recent 12.5% rise, electrical energy costs have elevated by 500% since 2010.
“Companies and shoppers are more and more feeling the pressure of rising electrical energy costs, which constantly outpace inflation,” says van der Linde, who notes that the punishing value of energy undermines the nation’s efforts to revive mining and different heavy industries. “I don’t assume the surroundings is conducive to increasing the economic system’s industrial base.”
The long-term resolution, specialists agree, is to create a extra aggressive energy market. That is already coming into play; plans to ‘unbundle’ Eskom by separating its era, transmission and distribution features had been first introduced in 2019, with the imaginative and prescient that the era arm will finally compete with different era corporations to supply electrical energy at aggressive costs.
But for now, the system is at a half-way home stage. Massive industrial energy customers and rich householders have more and more voted with their ft by putting in their very own photo voltaic panels and battery storage, in some circumstances disconnecting from the grid totally. However this feature isn’t but obtainable to lower-income households, given the excessive upfront prices of putting in photo voltaic panels or different power applied sciences.
Whereas Eskom stays answerable for delivering the overwhelming majority of the nation’s energy, the rise in self-generation leaves the utility with “a weaker buyer combine”, says Chetty.
Whereas Eskom has actually improved its place, few in Megawatt Park, the agency’s Johannesburg headquarters, can really feel assured that its troubles are over.
