TRACY LEDGER | Minister’s promises on energy affordability ring hollow

Share current article via EmailShare current article via FacebookShare current article via TwitterShare current article via LinkedInTracy LedgerHead of Just Transition, Public Affairs Research Institute

ExpandElectricity and energy minister Kgosientsho Ramokgopa. File picture: Freddy Mavunda Story audio is generated using AI

Electricity and energy minister Kgosientsho Ramokgopa has repeatedly stated that the growing unaffordability of electricity — particularly for low-income households — is “the most pressing energy challenge” for South Africa.

We agree: the Public Affairs Research Institute (Pari) has shown that low-income households often sacrifice food expenditure to pay for electricity and that the cost of electricity undermines small and micro enterprises, notably the home-based livelihoods of women.

Socioeconomic development requires that these users consume more electricity — this is the pathway to reducing poverty and inequality. Affordability is the biggest obstacle to achieving this.

To date, the department of electricity and energy, has not taken any concrete action to tackle affordability, and current proposed policies are unlikely to effect change. The minister has been extremely enthusiastic about the new draft electricity pricing policy (EPP 2026) as a tool to deliver affordability.

In the media briefing held prior to the release of the EPP, he stated that more efficient operations and cost-reflective tariffs would result in lower prices, and also that the free basic electricity (FBE) allowance would be increased significantly. But is the EPP actually going to deliver these promised outcomes?

Although the policy contains several statements to the effect that consumer affordability is “essential”, the overarching theme of the EPP is that tariffs must be high enough to allow licensees (the largest and most important of which is Eskom) to recover all operating costs and maintain financial sustainability. Despite the supposed commitment to only allowing licensees to claim “efficient” costs, there is no indication that in future Eskom will no longer be allowed to claim costs such as the enormous historical cost overruns on the Medupi and Kusile builds (due in large part to corruption and mismanagement and estimated to be around R200bn), or its overpriced coal contracts, or that the department of electricity and energy (as shareholder) will closely monitor all of Eskom’s expenditure to ensure maximum efficiency.

South Africa is currently producing excess electricity: demand has fallen over the past 10 years as a result of rapidly increasing prices — which have resulted in consumers using less electricity or switching to cheaper embedded generation — and a stagnant economy

Eskom’s current profitability (celebrated by the department) has come at the expense of deepening household poverty through steep electricity price increases. This trend is unlikely to change under the EPP, which appears to place Eskom’s financial sustainability over all other outcomes.

This approach essentially guarantees that the 40% of households living below the lower-bound poverty line will never have access to affordable electricity without a separate subsidy scheme. The FBE subsidy is thus a crucial tool for achieving affordability. However, the current level is too low — only 50kWh per household per month — and well below what is required for a basic standard of living or to support modest livelihood strategies. Prior to the release of the EPP the minister stated clearly that the EPP would increase the FBE, perhaps up to 200kWh or 300kWh per month. However, the published EPP contains no such proposal at all, merely a vague reference that the state will “review” the subsidy at some unspecified future point.

In addition to the fact that the FBE allowance is too low, the implementation of the subsidy has been very poor: municipalities receive funding for the subsidy from national budget allocations, but only pass it on to around 30% of eligible beneficiaries. The department of electricity and energy has never taken any steps to improve this, despite the fact that it is the “owner” of this policy. Poor households have been deprived of tens of billions of rand of (already funded) benefits as a result.

South Africa is currently producing excess electricity: demand has fallen over the past 10 years as a result of rapidly increasing prices — which have resulted in consumers using less electricity or switching to cheaper embedded generation — and a stagnant economy. Eskom estimates that excess capacity is around 5,000MW to 7,000MW per day, but only during certain off-peak periods, and that more than 5TWh of electricity could be curtailed by 2028.

Curtailment comes at a cost that must be covered. The solution? Sell the excess power at deeply discounted rates. This could be an outstanding policy initiative to support the electricity users that need this support the most — low-income households and small businesses. The knock-on development impact could be considerable: improved household food security, an increase in small enterprise activity and supporting a wide range of livelihood strategies.

In Australia, excess generation by solar producers has resulted in a programme that allocates eligible households three hours of free electricity each day within the peak solar generation times around midday, up to a maximum of 720kWh per household per month.

But what has South Africa decided to do? To sell the excess power at a deep discount to cryptocurrency mining companies to encourage the growth of these businesses in South Africa. This is an industry that will generate very little new employment and that also requires large amounts of water, which South Africa cannot spare. The only beneficiaries of this policy will be the shareholders of these companies. How can the department of electricity and energy square its supposed commitment to more affordable energy for those who need it the most while proposing these kinds of “solutions”?

The minister has himself highlighted the contradiction between excess energy generation and millions of users who cannot afford electricity, while still supporting this cryptocurrency “solution” rather than embracing innovative solutions around how excess electricity could increase affordability for those in greatest need.

We need an energy sector that directly supports the national development agenda — the aspirations set out in the constitution and the national development plan — and does not erase these to support the interests of a small number of vested interests

Yet another potential policy supported by the minister is carbon capture technology, to reduce the emissions of coal-fired power stations so that they can operate longer. Apart from the obvious point that if we are anticipating an excess generation problem there is little reason to extend the life of ageing coal plants — particularly when considered against the backdrop of the enormous amount of cheaper renewable power available as an alternative — carbon capture greatly increases the cost of electricity generation.

It also increases the amount of water required: Eskom’s coal-fired power plants already consume 3% of South Africa’s total freshwater resources, and almost a third of allocated water in western Mpumalanga. Implementing carbon capture would result in more expensive electricity tariffs and less water available for the rest of South Africa.

The minister is correct in his repeated statements that affordability of electricity is essential to socioeconomic development and one of the priority issues to be tackled in energy market reform. But until this translates into concrete policy and action it is worthless for the millions of South African households and businesses that urgently need change.

What is needed is a “developmental” energy sector. Energy is the critical input that facilitates socioeconomic progress and equity. We need an energy sector that directly supports the national development agenda — the aspirations set out in the constitution and the national development plan — and does not erase these to support the interests of a small number of vested interests.

Would you like to comment on this article?Sign up (it's quick and free) or sign in now.

Please read our Comment Policy before commenting.