Eskom not out of the woods – more bailouts and price increases on the cards

Eskom believes that it can make a profit for the current financial year, but it is still far away from the stage where it no longer relies on state bailouts or usurious tariff increases.

The state-owned power utility’s latest financial results for the year ended 31 March 2024 (FY2023/24) showed that the group incurred a loss of R25.5 billion before tax.

This is despite a government bailout of R76 billion.

The loss came during a period of heightened load shedding, with the group often escalating rolling power outages to stage 6.

Municipal debt added salt to the wound, with arrear debt owed by municipalities to Eskom sitting at R74.4 billion at 31 March 2024.

That said, the group said that unaudited results for the first six months of FY2024/25 showed a remarkable improvement as there was no load shedding over the period and that the group’s diesel usage was slashed.

Eskom even forecasts a profit for the full FY2024/25. 

Nevertheless, Claire Bisseker from the Bureau for Economic Research’s Impumelelo Economic Growth Lab said that this profit rests on the group achieving an EAF of 70% by March 2025, which is above its current level of 62%.

It will also require a significant tariff increase.

Eskom CEO Dan Marokane warned that an inadequate tariff path would constrain Eskom’s ability to expand infrastructure and could result in further reliance on government support beyond March 2026.

Eskom has requested massive price hikes through 2027, which will effectively see prices climb 66% over the period, which includes:

• 36.15% on April 1, 2025;
• 11.91% on April 1, 2026;
• 9.1% on April 1, 2027.

“Eskom is still a long way from being placed on a sustainable footing where it no longer relies on state bailouts or usurious tariff increases,” said Bisseker

“Structural reforms to liberalise the energy sector must be deepened and accelerated.”

TRANSNET 

Eskom is also not the only state-owned entity that needs reforms, with Transnet’s latest results highlighting how the country’s ports and rail network are struggling to gain traction amid a host of operational challenges. 

Although Transnet said that it has made early progress in stabilising its operations and improving financial performance, the interim financial loss of R2.16 billion in 2024 was larger than the comparable loss of R1.6 billion in 2023.

This was primarly due to operational slippage in the container port division, which partially offset a small 3.2% increase in rail freight volumes.  

Container volumes also declined to 2.12 mil twenty-foot equivalent units (TEUs) from 2.14 mil previously.

Transnet said that this was due to weaker demand, a lack of equipment and adverse weather.

“The results underscore the urgent need for fresh investment in port infrastructure. Unfortunately, the process of securing a private port operator to manage Durban’s Pier 2 Container Terminal has floundered in the courts” said Bisseker.

Transnet’s Freight Rail volumes increased from 75.6 Mt in 2023 to 78 Mt in 2024.

Although the constant fall in volumes of key exports, such as coal, has been detained, Transnet will still fall far short of its whole-year freight rail target of 170Mt for 2024/2025 due to the slow pace of improvement.

Transnet’s Recovery Plan’s aim is for rail volumes to recover to 226Mt by the end of 2026, which will restore Transnet’s performance to the level of five years ago.

“Anything less will threaten jobs along the supply chain. The bottom line is that Transnet is performing below the government’s Recovery Plan and well below the volumes required to support an economic recovery,” said Bisseker.

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