South Africa’s public electricity supplier Eskom is under increasing pressure as new private players enter the electricity market. While Eskom continues to struggle financially, the gradual liberalization of the sector allows independent producers and energy aggregators to challenge its dominance in the most profitable segments.

During a media briefing on June 24, Kgosientsho Ramokgopa, South Africa’s Minister of Electricity, called Eskom’s struggle to supply electricity while failing to collect payments an “existential problem.” He explained, “They are spending money they must collect from the bulk consumer, and where they are reticulating. They are finding it difficult to collect, so they’re unable to reinvest back into their asset base.”

The minister revealed that these unpaid bills increase by 3 billion rand per month—about $167 million monthly or nearly $2 billion annually—posing a direct threat to Eskom’s financial sustainability.

Since 2022, several regulatory reforms have eased market entry rules. Notably, the exemption threshold for private producers rose from 1 megawatt (MW) to 100 MW, enabling a surge of alternative energy suppliers.

These independent producers, mainly specializing in solar and wind power, supply large industrial clients directly through the wheeling mechanism. This system allows electricity to be transmitted via Eskom’s grid infrastructure without relying on its commercial offers.

Companies like Ampli Energy, Enpower Trading, and EXSA act as intermediaries between producers and industrial customers. They offer customized contracts that undercut Eskom’s tariffs while leveraging the public grid for delivery. This shift particularly affects large industrial, mining, and commercial firms, which previously had no real alternative to Eskom due to the closed market structure.

As a result, Eskom is losing some of its most lucrative customers to these new channels, reducing its sales volumes in the commercial and industrial sectors. These clients historically provided vital revenue that helped offset universal service costs and losses in less profitable areas.

Financially, Eskom’s situation is deteriorating. For the 2023/2024 fiscal year, the company posted a net loss of 55 billion rand (approximately $3.05 billion), up from 26 billion rand (around $1.44 billion) the previous year. Although an improvement is anticipated in 2024/2025, it will heavily depend on continued government support.

Meanwhile, Eskom remains responsible for maintaining the national grid, investing in infrastructure, and covering distribution costs in low-margin regions.

Abdel-Latif Boureima