Eskom CEO André de Ruyter has moved to debunk perceptions that South Africa’s electricity prices are too high.
Addressing The Joburg Indaba on Thursday, de Ruyter said the country’s commercial, industrial and residential electricity tariffs are competitive by international standards.
He cited a 2018 study by Statista and a 2020 report by NOVA economics, which surveyed 100 countries, to back his comments.
Lower than 53 countries
He explained, “These studies have taken into account the markups added by municipalities and is not exclusively focused on Eskom tariffs.
“South Africa’s residential consumers pay an average of 133.67 c/kWh, which, believe it or not, is a lower tariff than more than half (53 of 100) the countries surveyed.
“South Africa’s average commercial tariff of 122.96 c/kWh is cheaper than 71 of the 100 countries surveyed, while industrial tariffs are among the lowest 20 countries surveyed, at 76.32 c/kWh.”
A 2016 survey of 39 sub-Saharan African countries also found that South Africa’s electricity costs were the third lowest, de Ruyter added.
“Similarly, compared to other utilities in the sub-Saharan region, Eskom’s electricity price is relatively low. The current average selling price is R1.02/kWh, and this is below the levels required to be cost-reflective,” he said.
R60 billion revenue gap
De Ruyter said Eskom’s low average tariff has resulted in an average annual revenue gap of R60 billion. This exceeds Eskom’s annual cost for operating, maintenance and employee benefits and “does not augur well” for its sustainability.
In July, Eskom won a court bid to set aside National Energy Regulator of SA’s (NERSA) decision to deduct a R69 billion government bailout from Eskom’s allowable revenue for the 2019/20, 2020/21 and 2021/22 financial years.
NERSA subsequently said this would result in higher electricity prices and would “further suppress economic activity.” Eskom however said the ruling would pave the way towards its financial sustainability.
De Ruyter’s comments follow a similar presentation to Parliament by Eskom CFO Calib Cassim in September.
Cassim said, “Currently, Eskom’s average price is [less than] $0.07/kWh, which is extremely low by any credible international benchmark.
“[It] is significantly below cost-reflectivity and [is] the main cause of Eskom’s financial unsustainability. Once cost reflectivity is achieved $0.09/kWh, the price will still be very low and competitive.”