Eskom, South Africa’s state-owned power utility, is looking to drastically increase electricity tariffs in an attempt to offset dismal financial losses incurred during the 2018/19 financial year.

While promises of rejuvenation, restructuring and resilience have been thrown about by Public Enterprises Minister, Pravin Gordhan, and even President Cyril Ramaphosa, himself, the situation at Eskom remains undeniably dire.

This grim operational and financial predicament was exemplified earlier this week when the Eskom board announced its yearly losses.

Eskom posts R21 billion loss in 2018/19

A sheepish looking interim CEO, Jabu Mabuza, who officially began his tenure on Thursday, announced that the embattled State Owned Enterprise (SOE) had incurred a loss of almost R21 billion in one year.

This is an increase of almost 800% in financial losses since 2017; signifying the rapid demise of South Africa’s power supplier. And while the much-loathed load shedding schedule, which cost the economy billions of rands in 2018, has been put on ice, the month of August – and beyond – brings with it more bad news.

Energy experts have warned that load shedding is likely to make an ominous return in August after Eskom announced that it was struggling to meet energy demands earlier in July.

The power utility’s continued operational sustainability rests solely on the shoulders of government via the way of taxpayers’ hard-earned cash. But even gratuitous government bailouts – estimated to total in excess of R120 billion within the next two years – will struggle to keep the fires burning.

A dismal power plant maintenance routine – coupled with board uncertainty – means that South Africans are in for a rough ride – whether it be at the mercy of load shedding, greater taxation or increased electricity tariffs.

The latter is being eyed by Eskom as a way to recoup its R21 billion loss.

South Africans to brace for 80% increase in electricity costs

According to Ted Blom, lead contributor to the Energy Expert Coalition, Eskom seeks to implement a four-step turnaround strategy, which includes:

Increase tariffs by challenging the previous NERSA RCAS & MYPD decisions in court – with a target of increasing electricity tariffs by around 80%. Cut some costs (yet undefined). Restructure & unbundle. Future applications to Government for more bailouts.

While all of the above are contentious – and slightly vague – it is point number one which will have South Africans fuming.

In April, Eskom implemented a 14% tariff increase which had been approved by the National Energy Regulator of South Africa (NERSA). Further tariff hikes approved by NERSA will, in 2020 and 2021, increase the cost of electricity to consumers by at least 22%.

With financial strain already strangling South African consumers, rapidly rising electricity costs are becoming unaffordable. This, in turn, is giving rise to illegal electricity connections which further decreases Eskom’s annual takings – and creates an unsafe environment. Municipal debt to Eskom currently stands at over R20 billion.

While a 22% hike is bad enough – the 80% raise, cited by Blom, would be wholly unbearable for most South Africans.

What can be done to save Eskom?

Blom explained that, in order to truly create affordable power, Eskom would need to trim its bloated workforce and root out any traces of corruption, saying: