Eskom under siege

Eskom taking the National Energy Regulator of South Africa (Nersa) to court over the issuance of distribution licences is a sign of the state utility attempting to preserve its monopoly on energy distribution.

This is according to Nersa’s head of electricity, Nhlanhla Gumede, who spoke to Newzroom Afrika following Eskom’s announcement that it is taking the regulator to court.

“As with Telkom back in the early 2000s, when new entrants came into the market, I’m sure you would have done anything to preserve your monopoly. That’s just the natural from businesses,” Gumede said.

“So, do I expect something different from Eskom? No. Eskom is doing what Eskom needs to.”

Eskom served Nersa with court documents following the regulator’s decision to award electricity trading licences to several private companies, including GreenCo Power, CBI Electric Apollo, Green Electron, and Discovery Green.

Gumede explains that these trading licenses grant firms the right to buy and sell electricity.

He notes that unlike other licences issued by Nersa, where there can only be one holder in the country or a given area, there is no limit to the number of entities that can hold trading licences.

“We come from an era in South Africa where you have local authorities who had the right to exclusively supply and trade in their areas of operation, which Eskom also has,” says Gumede.

“However, this changed when the constitution changed, but it only existed on paper as there was only really one trader, PowerX.”

“In the past two years or so, we have added a few. I think we are closer to eight now,” he continued.

Gumede pointed out that the issuance of additional licences to increase competition is encouraged by the National Energy Act.

However, any stakeholder is allowed to take any decision by the regulator on review, including Eskom.

Despite the utility’s improved performance, its total sales declined by 1 TWh year-on-year in the first quarter of the 2025 financial year.

Nedbank economist Isaac Matshego said Eskom’s share of the power supply market is expected to decline further as more private electricity production comes online.

This will benefit South Africa’s economy by making the electricity supply more resilient and less reliant on the operations of a single entity.

Matshego also said that alternative electricity sources have proven far cheaper than Eskom’s in most cases.

This helps bring down overall inflation and eases the cost of doing business in South Africa, having a knock-on effect on economic growth.

It is also vital for companies to produce cleaner energy to supply their operations, as some of the country’s largest trading partners are considering imposing carbon taxes on imports.

Over 85% of Eskom’s electricity comes from coal, which means that many South African companies must reduce their reliance on fossil fuels to ensure their products remain globally competitive.

As such, a declining reliance on the utility’s electricity will ultimately be beneficial for South African businesses.

However, it has pushed Eskom into a difficult position, with it needing to make up for declining sales by hiking its tariffs.

While its revenue for the first quarter rose by 15% compared to the same period last year, its sales volumes were 1 TWh lower.

This means its increased revenue primarily came from higher electricity tariffs on consumers.

Several energy analysts have warned that the utility’s declining sales trend may indicate a financial death spiral.

The move to small-scale renewable energy leaves Eskom with a higher percentage of non-paying customers.

To make up for the lost revenue, Eskom is implementing very high electricity price increases. This, in turn, drives more paying customers to install solar PV to save costs.

This downward spiral is accelerating, especially with South African businesses and households looking to mitigate load-shedding.