JOHANNESBURG, Gauteng — Eskom group chief executive Dan Morakane has formally proposed that free basic electricity funding be routed directly to the power utility to combat the escalating Eskom municipal debt crisis, which now threatens the national grid’s financial stability. This strategic shift is designed to ensure financial support reliably reaches indigent households while shielding the utility from severe revenue non-collection challenges.
The proposal coincides with Eskom’s announcement of a remarkable 30.3 billion rand profit for the year, more than doubling the previous year’s earnings. This financial turnaround was achieved despite a 6.2% drop in electricity sales volumes, a structural decline driven by high power prices stifling manufacturing growth and industrial demand. Morakane credited the results to a rigorous three-year operational recovery plan, optimized plant maintenance, and drastic reductions in diesel expenditure. Consequently, the Energy Availability Factor (EAF) has reached its highest point in six years, with multiple stations sustaining 63% to 95% availability. This operational reliability has enabled South Africa to operate for over a year without load shedding, maintaining 100% coverage of national electricity demand.
However, Morakane warned that municipal debt has surged from 111.6 billion rand to 120 billion rand, evolving from a corporate challenge into a systemic country risk. He pointed out that municipalities routinely retain national equitable grants without settling their bulk electricity accounts, a dysfunction mirrored in the water sector that demands immediate National Treasury intervention. Furthermore, he noted that the current metrics for free basic electricity allocations are based on outdated, two-decade-old estimations and require urgent recalibration to reflect modern realities.
Addressing the burden placed on compliant consumers who effectively subsidize municipal collection failures, Morakane clarified that a mere 2% of the current tariff is allocated to offset bad debt. He emphasized that traditional enforcement measures, such as disconnecting major metros like the City of Johannesburg, are unviable. Instead, comprehensive municipal funding model reform is required. To provide immediate consumer relief, the Eskom board has committed to abandoning double-digit tariff hikes, anchoring future price adjustments more closely to inflation rates.
To further mitigate cost pressures and avoid passing expenses to the consumer, Eskom is accelerating internal cost-saving measures. The utility secured 22.4 billion rand in savings this past year toward an ambitious 112 billion rand target for the 2030 financial year. Simultaneously, the utility is tackling non-technical losses and electricity theft through an aggressive two-year rollout of seven million smart meters, a move already demonstrating improved revenue predictability and theft reduction in early deployment zones.
On the topic of structurally unbundling Eskom into distinct generation, transmission, and distribution entities, Morakane cautioned that global precedents show such transitions typically require five to ten years to mature. The unique scale of South Africa’s municipal non-payment issue means the unbundling timeline is directly tied to resolving this debt first. The Eskom restructuring task team is slated to present concrete solutions within the next three to four months. Following that, the utility will need to seek necessary consents from approximately 25 lenders who currently hold collateral over the group’s earmarked assets.
These strategic pivots align with the newly revised electricity pricing policy draft, which is currently open for public comment over the next 30 days. The updated framework aims to introduce protective pricing dispensations for energy-intensive industries, such as smelters, while safeguarding middle-class and low-income households. Morakane stressed that stimulating the broader economy—which currently grows at just 1% but requires a 3% expansion anchored by a 2% rise in electricity demand—is critical to sustaining Eskom’s operational momentum and securing long-term energy affordability for all South Africans.
