Taxpayer bailouts save the day for Eskom
Economists at the Bureau for Economic Research (BER) have warned South Africans to take Eskom’s latest financial results with a pinch of salt, noting that the company would have had a cash shortfall of R38 billion without taxpayer bailouts.
Eskom reported a significant boost in earnings this week, posting an after-tax profit of R16 billion in FY2025, up from a loss of R55 billion in 2024.
The utility attributed the turnaround to successes in its generation recovery plan, touting high levels of energy availability, reduced costs tied to diesel use, and the general sweat and blood efforts from its 42,000-strong workforce.
While Eskom’s turnaround and performance is undeniable—with load shedding all but snuffed out—the BER warned against taking Eskom’s reasoning at face value.
This is because Eskom is still heavily indebted and still relies on government and taxpayer support to stay afloat. Without this support, it would still be in the red.
The point was raised by Eskom’s auditors, which flagged concerns about Eskom’s going concern status, highlighting its dependence on government support, operational assumptions, regulated revenue by NERSA, municipal arrear debt and energy losses.
According to the BER, Eskom’s turnaround and return to profitability had less to do with its operations and more to do with three other factors: price hikes, tax rebates, and bailouts.
The first is the significant electricity price increase in 2024/25 of 12.5%.
This led to a huge boost in Eskom’s revenue at the expense of customers, who continue to feel the pressure and burden of the hikes, with little to no alternatives.
This burden will continue in 2026 and 2027, with almost 9% increases coming in those years—about six percentage points higher than inflation.
The price of electricity has risen by 600% in the past decade, and the continued hikes pose and existential threat to households and businesses, and thus Eskom itself.
Thank you, taxpayers
The second big boost for Eskom’s profits was the R12 billion diesel rebate refund from SARS.
When diesel is used for non-road purposes—such as burning diesel to power gas turbines—buyers are entitled to a rebate for the Road Accident Fund levy attached to the diesel price.
Eskom used a lot of diesel in the 2025 financial year (ending March 2025), giving it a huge rebate. As Eskom burns less diesel—such as the significant reductions this year—this rebate will decrease.
The final boost for Eskom came through a reduction in finance costs of R5 billion, resulting from the massive government bailout used to reduce Eskom’s debt, funded by taxpayers.
Notably, the BER stressed that without the significant R64 billion injection from the taxpayer bailout, Eskom would have ended the year with a cash shortfall of approximately R38 billion, compared to its cash holdings of R23.6 billion at the start of the year.
“In short, Eskom requires ongoing bailouts to prevent it from running out of cash,” it said.
The song and dance about Eskom’s profit also belies the deep-rooted problem threatening to collapse the company: municipal debt.
At the end of March 2025, municipal arrear debt amounted to R94.6 billion, representing a 27% increase from the previous year. It amounted to R103.5 billion as of the end of August 2025.
This long-standing debt is growing at an alarming rate, and by Eskom’s own admission, interventions and programmes to address it have not yielded any success.
Eskom CEO Dan Marokane told Newzroom Afrika that if the rising debt trend continues, the utility may have no choice but to ask the National Treasury for another taxpayer-funded bailout.
Without urgent intervention, municipal debt could exceed R300 billion by the end of the 2030 financial year, the group warned.
While the government has spent the last year or so talking about working on a plan to address the problem, nothing of substance has been announced.
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