This price increase has drawn sharp criticism from many experts who warned that many South African households cannot afford it.<\/p>\n\n\n\n
EE Business Intelligence founder and energy analyst Chris Yelland said Eskom\u2019s price increase application is preposterous.<\/p>\n\n\n\n
\u201cAfter price increases of two to five the inflation rate for many years, how can Eskom apply for a 36% price increase seven times the inflation rate on 1 Apr 2025?\u201d he asked.<\/p>\n\n\n\n
The South African Human Rights Commission warned that Eskom\u2019s proposed electricity price hikes could spark social unrest in South Africa.<\/p>\n\n\n\n
Commission chair Chris Nissen said<\/a><\/strong> people in poor communities struggle to make ends meet, and the planned price hikes could ignite social unrest.<\/p>\n\n\n\n \u201cAs the commission, we foresee that these kinds of issues are sparks in our community that can ignite unrest,\u201d Nissen said.<\/p>\n\n\n\n Eskom argues that it needs such a high price increase to improve its financial sustainability by migrating to cost-reflective prices.<\/p>\n\n\n\n However, Nissen said Eskom\u2019s dismal financial situation and high debt burden were caused by years of mismanagement and corruption.<\/p>\n\n\n\n He said Eskom now wants to recover its debt from the poorest of the poor in South Africa through high electricity price increases.<\/p>\n\n\n\n He added that increasing electricity prices to address the debt and place the burden on struggling South African households is misguided.<\/p>\n\n\n\n \u201cPoor households should not pay the price for wrongdoing for this in power,\u201d Nissen told Cape Talk.<\/p>\n\n\n\n Eskom argues that it needs to recover the cost of producing electricity and that price increases are the only way to achieve this.<\/p>\n\n\n\n However, the concept of cost-reflective prices is misguided when working with a monopoly like Eskom because its costs are not market-related.<\/p>\n\n\n\n For example, during the era of state capture, Eskom gladly paid R238,000 for a mop and R80,000 for knee guards. The power utility\u2019s costs are, therefore, highly inflated.<\/p>\n\n\n\n The same goes for Eskom\u2019s bloated workforce, years of above-inflation salary increases, and irregular, fruitless, and wasteful expenses.<\/p>\n\n\n\n Most South Africans do not like paying for the years of corruption and mismanagement at Eskom.<\/p>\n\n\n\n BusinessTech examined the cost of producing electricity to see how much more South Africans are now paying for electricity than they should.<\/p>\n\n\n\n Between 1994 and 2006, when Eskom was well-run, electricity price increases were closely aligned to inflation.<\/p>\n\n\n\n Things started to change in 2007 when load-shedding first hit South Africa. Incidentally, Jacob Zuma was also elected as ANC President at the end of 2007.<\/p>\n\n\n\n From 2008, electricity price increases rapidly rose, far exceeding the inflation rate. This trend continued for 15 years.<\/p>\n\n\n\n Corruption and mismanagement at Eskom caused the cost of producing electricity to skyrocket.<\/p>\n\n\n\n In 2006, Eskom spent R147,748 to generate a single GWh of electricity. In 2023, the cost ballooned to R1,504,467 per GWh.<\/p>\n\n\n\n This should never have happened. Adjusting the 2006 cost to the average inflation rate from 2006 to 2023 means Eskom should pay R380,819 to generate a GWh of electricity in 2023.<\/p>\n\n\n\n There are many reasons it currently costs Eskom R1,504,467 instead of R380,819 to produce a GWh of electricity.<\/p>\n\n\n\n Unfortunately, most of these reasons relate to corruption and mismanagement. It includes massively overpaying for the Medupi and Kusile power stations.<\/p>\n\n\n\n If Eskom continued to be well-run between 2007 and 2023, its cost to produce electricity would have been around 75% lower.<\/p>\n\n\n\n Simply put, South African households and businesses should be paying 75% less for electricity than they currently do.<\/p>\n\n\n\n The chart below shows how Eskom\u2019s electricity production costs racker inflation from 1994 to 2007 and then outstripped inflation for the next 15 years.<\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/10\/SAHRC-Chair-Chris-Nissen-1024x576.jpg\")
<\/a>South African electricity prices should be 75% lower<\/strong><\/h2>\n\n\n\n
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