Eskom recently claimed that electricity prices in South Africa are much lower than international standards and that we are paying 40% less than elsewhere in the world.
Eskom spokesperson Sikonathi Mantshantsha said South African consumers are subsidised by either Eskom’s balance sheet or by the taxpayer.
He said the unfortunate situation is that electricity costs a lot of money to produce and that South Africans are not paying a realistic price for electricity.
“The electricity consumer has not further migrated towards what the efficient price of electricity is,” Mantshantsha said.
This low low price for electricity, Eskom said, means that it has not been able to recover its efficient and prudent costs.
The situation is aggravated by the high number of non-paying customers, which places an additional burden on paying customers.
“Large parts of South Africa are bluntly refusing to pay for electricity, which places a lot of burden on people who are paying for their consumption,” said Mantshantsha.
He said the country needs non-paying customers to come to the party to reduce the load on people who are paying.
Eskom is, therefore, taking a double-hit – electricity prices are too low for it to recover its generation cost and many customers refuse to pay their bills.
Mantshantsha admitted that Eskom has many inefficiencies which have impacted electricity supply, reliability, and pricing.
He said the company is now actively addressing these inefficiencies to “fix the company” and ensure it is “working correctly”.
South Africa’s electricity prices benchmarked
South Africa has a history of being a world leader in electricity adoption and production, which led to the establishment of Eskom in 1923.
Eskom was so successful that by the end of 1990 it was supplying more than half the electricity in Africa.
Eskom also became a highly efficient electricity producer and in its 1994 annual report, it promoted the fact that it was the world’s lowest-cost producers of electricity.
South Africans have become accustomed to paying very low prices for electricity without any large annual increases between 1994 and 2007.
This suddenly changed in 2008, when chronic power shortages saw the country experiencing load-shedding for the first time.
Over the next decade, electricity prices increased by double the historical average, which has hit South Africans hard.
After seeing large annual increases for many years, it is natural to assume South Africa’s electricity prices are now expensive compared to global standards.
This is, however, not the case. In fact, Eskom and Mantshantsha are correct in stating that electricity prices in South Africa are much lower than international standards.
South Africans paid such a low price for electricity between 1994 and 2007 that, even despite large increases for over a decade, we still pay much less than most countries.
The charts below, courtesy of Statista and Global Petrol Prices, show how local prices compare to other countries.
The comparisons below give the price of household electricity in US Dollar (USD) per kilowatt-hour (kWh).