Eskom’s biggest weakness

Eskom’s generation business has consistently reflected a loss over the past five and a half financial years, showing no sign of improvement.

This means the power utility’s other two segments, which seem to have stabilised and are on the road to improvement, have to compensate for the continuous burden that is the generation sector.

The generation arm of Eskom posted a R4.3 billion loss in its interim results for the six months ending 30 September 2024.

In contrast, the power utility’s transmission division reported a R21.5 billion profit while distribution posted an R857 million loss.

However, the generation arm’s losses posted after the first half of the financial year are typically disproportionally lower than at the end of the twelve months.

At the end of the previous financial year, generation realised a R36 billion loss, over three times the R10.9 billion loss reported after six months in September 2023.

Transmission and distribution both realised a profit at the end of March 2024, with only distribution making a loss at the end of September 2023.

The transmission and distribution arms have noticed an improvement in performance since the end of the 2019 financial year, when both reported losses.

Since then, these divisions have stabilised, with transmission in particular recording a substantial increase in profit.

However, generation has not made a profit since September 2017. Since the end of March 2018, the business has seen a constant increase in losses at the end of every financial year.

The first few losses since September 2017 were relatively minor — R3 billion at the end of March 2018 and another R3 billion six months later.

Then things went south fast, with a R24 billion loss reported at the end of the 2019 financial year and another R23.3 billion loss reported 12 months later.

This improved to a R20.2 billion loss at the end of March 2021 but then shot up again to R28 billion in March 2022. Since then, it has continued to increase.

The table below shows losses and profits reported at the end of every six months from the beginning of the 2020 financial year for each of Eskom’s energy divisions.

Ageing coal-powered generation fleet

Energy analyst Professor Samson Mamphweli has pointed to Eskom’s ageing coal generation fleet as the root of this problem.

Maphweli noted how expensive maintaining the old fleet is, and the adverse effects of this cost are realised in how much South Africans are charged for electricity.

In 2024, Eskom applied to the National Energy Regulator of South Africa (Nersa) for a 36.15% increase in electricity tariffs that Mamphweli says was influenced by the revenue needed to maintain the fleet.

However, Nersa only approved a 12.7% tariff hike for the 2025/26 financial year, effective from 1 April 2025.

It also approved a 5.36% increase for the 2026/27 financial year and a 6.19% increase for 2027/28.

Despite this, Mapmphweli said Eskom has managed to mitigate the issue.

“Other analysts are saying that the worst is yet to come because they are looking at how difficult it is becoming to maintain Eskom’s coal fleet,” Mamphweli said.

“However, Eskom managed to maintain it to a certain extent thanks to the operation generation recovery plan. Breakdowns were reaching 18GW, and this plan helped bring it down to 11GW.”

Eskom chair Mteto Nyathi says that the recovery plan was adopted in March 2023 and will elapse at the end of next month, adding that this should signal the end of load-shedding for South Africa.

“At the end of that plan is when we can come back, the Minister, myself, and the CEO, and communicate to South Africa that there’s not going to be load-shedding,” said Nyati.