How electricity prices have skyrocketed over the last two decades

High electricity tariffs have been listed as the central cause behind the decline of South Africa’s manufacturing sectors and slowed economic growth. 

Eskom’s electricity tariffs have increased by 937% from 2007 to 2024. Inflation over this period was 155%, so electricity tariffs increased six times faster than inflation, according to PowerOptimal’s data.

Electricity prices in South Africa surged during former President Jacob Zuma’s tenure (2009–2018), coinciding with widespread state capture of state-owned enterprises (SOEs) like Eskom and Transnet.

The Zondo Commission found that corruption and mismanagement severely undermined these entities.

Eskom’s irregular expenditure reached R14.7 billion, with significant links to Gupta-associated contracts. President Cyril Ramaphosa estimated that state capture cost South Africa around R500 billion during Zuma’s presidency.

Eskom’s financial recovery from state capture, which began around 2008, has been hampered by corruption, forcing steep electricity price hikes to maintain solvency.

Concurrently, inadequate maintenance and investment in aging infrastructure led to unreliable power supply and frequent load-shedding.

Energy expert Vally Padayachee told Newsday that Eskom has financial troubles that complicate its cost-effectiveness. 

Padayachee is a strategic advisor to the Association of Municipal Electricity Utilities (AMEU).

“Eskom’s inability to operate effectively due to historical underfunding, high operational costs, and inefficiencies means it struggles to provide a reliable service,” he said. 

Minister of Electricity Kgosientsho Ramokgopa recently addressed parliament regarding the National Energy Regulator of South Africa’s miscalculation of Eskom’s approved revenue.

Nersa’s mistake forced the regulator to readjust its initial approval and approve an additional 3.4% increase for the 2026/2027 financial year, resulting in a price increase of 8.76%.

In 2027/2028, an additional 2.64% will be charged to customers, leading to a total increase of 8.83% for the financial year. 

The Parliamentary Committee on Electricity raised concerns about the increase and called on the minister to make electricity more affordable. 

He replied that electricity is expensive for everyone and that the ministry is working hard to address this.

Low income households choosing between food or electricity

“The pricing policy of electricity rests with me. And it’s my view that we can’t deprive people of electricity because access to it is not a mere privilege but a right: to education and access to information, among others,” he said.

In an interview with eNCA, Ramakgopa said the cost is forcing low-income households to choose between buying food or paying for electricity. 

Padayachee explained, however, that bringing down Eskom’s electricity tariffs is not a simple process, as the entity’s tariffs are already too low as it is. 

The energy regulator is forced to balance affordability for customers with Eskom’s financial sustainability to make electricity price determinations.

“Eskom has consistently struggled to secure cost-reflective tariffs from NERSA. Instead, they have been granted lower tariffs as part of balancing affordability,” said Padayachee. 

“This has ultimately undermined Eskom’s operational capacity.”

He explained that harmonising the needs for cost-reflectivity and affordability when making decisions on tariff increases is extremely important. 

“It is crucial for Eskom to remain viable while ensuring that end-use customers continue to access affordable electricity.”

Padayachee is concerned, however, that lower, non-cost-reflective tariffs have been granted by NERSA to protect customers, but without cost recovery mechanisms

For Eskom’s MYPD6 application, Eskom claimed its generation division alone has a revenue shortfall of R107 billion. 

With NERSA’s new adjustments in place, the SOE still has a R53 billion shortfall. Eskom’s annual report for the last financial year revealed that it is operating at a record loss of R55 billion. 

Competition key to cutting costs

The ministry plans to bring down the cost of electricity through democratising the energy space and its tariff structure.

From the beginnings of widespread electricity use, there have been calls to prevent a monopoly in the market. 

According to Eskom’s tariff history, the Power Companies Commission in 1909 advised against the monopolisation of electricity in South Africa. 

“The supply of electric power leads to the establishment of a virtual monopoly in a commodity which has become practically a necessity of modern civilisation,” the commission said. 

“It should be left as far as possible to private enterprise; at the same time, it should be placed under government control and subjected to regulations.”

Over 100 years later, the South African electricity market shows signs of moving in this direction. 

The Department is working towards an April 2026 deadline to open up the national grid to competitive electricity trading, ending Eskom’s monopoly on power generation. 

A wholesale tariff structure is being developed for the new democratised electricity market. Ramakgopa said that his hopes are resting on the success of this new market model. 

“If we can resolve that component, it would bring down the cost of electricity. For as things stand, electricity cost is untenable, hence a need for the revision of its pricing policy,” he said.