Eskom's single-digit tariff promise: Too little, too late?

Eskom has promised tariff increases of single digits in the not-too-distant future.

However, how much below 10% the increases will be remains to be seen.

Minister of Electricity and Energy, Kgosientsho Ramokgopa, speaking yesterday during Eskom’s year-end results for the year to March, said that “we have entered an era of a single digit tariff increases”.

Eskom reported its first profit in eight years yesterday.

Ramokgopa specifically pointed out that, between 2007 and 2024, electricity prices have increased by 937% while inflation over the same period increased by 185%.

“It's untenable, so we have to change that situation,” he said.

Eskom and government’s promise to keep a lid on tariffs comes as municipalities owe the utility just more than R100 billion, a figure that threatens to go as high as R300 billion in the next five years.

Tariffs for Eskom direct customers increased 12.74% from April, while municipal bulk purchases went up 11.32% from July.

Subsequently, it was revealed that the National Energy Regulator of South Africa made a mistake when calculating its price determination, meaning that consumers will have to absorb its R54 billion error.

As a result, the new tariffs to take effect in the 2026/27 financial year and into the next fiscal period are three times higher than the anticipated consumer inflation rate.

A week ago, the South African Reserve Bank said it anticipated that headline inflation will rise over the next few months, peaking at around 4%.

"Our forecast now incorporates higher electricity price inflation, of nearly 8% rather than 6%,” Governor Lesetja Kganyago said.

Kganyago singled out electricity price hikes as a major issue.

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The governor said that the recent pricing correction by the National Energy Regulator of South Africa, which saw a R54 billion under recovery through previous tariffs that customers now have to pay for, was pushing inflation higher.

“This is a reminder of the serious dysfunction in administered prices, which undermines purchasing power and weakens growth.

The solution to this crisis is not a higher level of inflation, but rather sector-specific reforms to improve efficiency,” Kganyago said.

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