JOHANNESBURG, Gauteng — As South Africa heads toward local government elections, the question of whether the country can afford free electricity for millions amid rising municipal debt to Eskom has taken center stage. The African National Congress (ANC) has pledged to expand free basic electricity access and slash municipal debt, but energy experts warn that the mathematics behind these promises require urgent structural reforms to avoid collapsing an already strained national grid.
The ANC’s platform promises a transformed local government landscape, highlighting that more than 26 million social grant recipients could potentially benefit from increased free electricity allocations. Additionally, the party has committed to improving municipal audit outcomes and reducing municipal debt to Eskom and water boards by 30% by 2031. However, with many municipalities already drowning in debt and struggling to deliver basic services, the fundamental question remains: who will pay for these expansive promises?
To unpack the economics behind these proposals, energy expert Professor Vally Padayachee provided a critical analysis of the current energy landscape. He noted that the current plan is to increase the free basic electricity allocation from 50 kilowatt-hours (kWh) to between 200 and 300 kWh per month.
Professor Padayachee argued that the increase is absolutely necessary, stating he would prefer the allocation to go up to 400 kWh. The current 50 kWh threshold was established long ago and is now insufficient given the dramatic changes in the economic landscape and the soaring cost of electricity. However, he cautioned that this will be a difficult road ahead. A budget of 21 billion rand was originally mooted for the 50 kWh tier, and the minister has indicated that this budget will not be increased to cater to the proposed 200 to 300 kWh expansion, even as the cost of electricity has gone through the roof.
When evaluating the better economic case—whether to focus on reducing electricity tariffs or expanding free provision—Professor Padayachee emphasized that the cost drivers within Eskom and municipalities must be addressed as a matter of urgency. Major cost drivers on Eskom’s side stem from the generation segment and primary energy costs.
Compounding the issue is a severe revenue collection crisis. Municipalities currently owe Eskom approximately 111 billion rand. Furthermore, both Eskom and municipalities are failing to collect the monies they have already billed for, while municipal reticulation services continue to suffer from significant leakages and operational inefficiencies.
To combat these challenges, Professor Padayachee outlined two necessary interventions. The first is an operational intervention by municipalities to root out inefficiencies and curb cost drivers. The second is a regulatory intervention from the national government.
Cabinet recently released an amended electricity pricing policy for public comment, which proposes significant changes to how inefficiencies are handled. A key proposal is the ring-fencing of technical and non-technical losses. Historically, the financial brunt of these losses was passed on to end-use customers, including households and commercial industries. Under the new policy framework, the National Energy Regulator of South Africa (Nersa) will establish strict benchmarks. If Eskom and municipalities exceed these loss benchmarks, they will be forced to absorb those costs rather than passing them on to the consumer.
Professor Padayachee stressed that government and Nersa must work collaboratively with municipalities to harmonize affordability tariffs at a lower level for consumers, while simultaneously ensuring that Eskom and municipalities receive cost-reflective tariffs. This delicate balance is vital for institutional survival; without cost-reflective tariffs, both Eskom and municipalities risk financial collapse.
As political parties campaign for local government support, Professor Padayachee advised that residents and voters should demand accountability. He noted that regardless of political affiliation, ordinary voters simply want the cheapest, most cost-effective electricity delivered via a safe and reliable grid.
He urged all political parties to make reasonable, pragmatic promises and, most importantly, to keep them. With the energy crisis demanding immediate attention, Professor Padayachee concluded that whichever party takes office must solve these structural issues “yesterday, not the day before.”
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