Eskom price hikes are wrecking South African households

The Pietermaritzburg Economic Justice and Dignity (PMBEJD) group says that Eskom’s double-digit price hikes—and the subsequent hikes from municipalities across the country—are leaving households broken, having to choose between having power or having food to eat.

Eskom implemented a 12.7% price increase on 1 April 2024, with municipalities across the country hiking their prices by similar amounts (ranging from 11% to 16%) from 1 July.

According to the PMBEJD, while Nersa knows and regulates the overall annual Eskom hikes, prices are largely opaque, not sufficiently regulated, and very messy at the local municipal level, where all sorts of additional charges are included.

This has resulted in households often receiving shocks to their electricity bills—including in Johannesburg, where prepaid users were hit with a poorly communicated and completely unavoidable R200 per month “service and capacity” surcharge on their bills from July.

But even on the national level, with Eskom’s fee hikes, the group said that rates far exceeded households’ ability to pay for them, and for most South Africans, electricity is unaffordable.

This is a growing crisis in South Africa that the Department of Energy and Electricity has acknowledged.

In July, Minister of Energy and Electricity Kgosientsho Ramokgopa said that electricity tariffs are increasing exponentially, and people can no longer afford electricity.

He said the rate at which Eskom tariffs and municipal tariffs are increasing is unsustainable, describing it as “an untenable situation”.

“We are getting to a situation where your lower-to middle class – even your public servants – can no longer afford the cost of electricity in this country,” he said.

“So as we speak now, it’s an affordability question; over a period of time, if you don’t address it, it’s a national security problem. Because people are ‘not going to just fold their arms’.”

Higher electricity prices also have inflationary pressure, which impacts the cost of goods and the cost of doing business.

“This is a problem that is likely to become acute over a period of time, and needs to be addressed urgently,” he said.

Ramokgopa said this week that the department and the South African Local Government Association (SALGA) are looking at ways to implement an electricity pricing plan in collaboration with Eskom and local municipalities.

However, Ramokgopa stressed the importance of energy regulator Nersa in finding solutions, saying that, as an independent authority, Nersa is responsible for protecting consumers and examining proposed tariff increases from Eskom and municipalities.

Ironically, Nersa frequently undercuts Eskom’s tariff applications—for example, the power utility applied for a 38% tariff hike in 2023 but was only granted 18%—and has been trying to rework methodologies to stop Eskom from allegedly ‘abusing’ the current system.

The utility is reportedly looking for yet another electricity hike of 36.15% and 44% for 2025.

However, Eskom has fought against the regulator every step of the way and has succeeded in several court challenges to stop the regulator from blocking its extreme hikes.

Nersa’s planned changes to how pricing and tariff hikes are determined have now been put on hold.

Eskom has in the past defended its price hikes saying that they reflect the cost of producing electricity. It has also pointed to municipal debt (now over R70 billion) from households not paying their bills as one of the biggest financial pressures it faces.

Households are breaking

Households across the country are feeling the pressure of rising electricity prices, but the vast majority of the population is on the edge.

More than half the population (55.5% or over 30 million people) live on the upper-bound poverty line of R1,500 a month, the group said. And a quarter (25.2%, or just under 14 million people) live on the food poverty line of R760 a month.

“Electricity hikes drive not only the price of direct energy at household level upwards, but also the prices of all other goods and services in the economy,” the PMBEJD said.

“When electricity prices go up, it means that households must absorb the increase of the tariff hike, plus the inflationary knock-on effect for all other essential goods and services required in the household.”

Making matters worse, for the majority of South Africans, electricity price hikes are leading to an impossible choice: food or power—when the reality is that you cannot live without either.

“The food/electricity nexus is also problematic in South Africa because both must be present for food to be put on the plate. All South African staple food must be cooked for it to be edible,” the group said.

The 2024 electricity increases in the areas where the PMBEJD tracks food prices have increased between the range of zero to R200 for households consuming an average of 350kWh a month.

350kWh is considered a low consumption volume. The new total cost of electricity for households consuming 350kWh per month, again in the areas it tracks, range from R900 to R1200 per month.

Using an example of the Domestic Lifeline Tariff in Pietermaritzburg, the group noted that, on a low electricity consumption of 350kWh per month, the new increase means that monthly electricity has increased by R136.05.

The Child Support Grant was increased by R20 a month (from April), the Old Age Grant was increased by R90 a month (from April), and an additional R10 will be added in October. The Special Relief of Distress Grant was also increased by R20 a month (from April).

“It is clear from the annual social grant adjustments of R20 and R90, that the new electricity tariff hike of R136.05 cannot be absorbed by the annual adjustments on social grants,” the group said.

“Further to this, social grants are specifically given to assist individuals, and families, mothers, and children to buy food and to absorb higher food costs, to assist with improving both child and household nutrition.

“However, as we can see from the above, the new electricity tariff hike acts to obliterate any monies that may have been directed to absorb higher food costs during the year, and moreover do not even cover the higher electricity charges in full.”

A similar pattern is seen regarding the national minimum wage—any increases to the NMW are severely undermined by electricity price hikes, which eat away at almost 40% of the increase.

Read: Big changes planned for electricity pricing in South Africa