Competition Commission lights a fuse on runaway utility hikes

A new Competition Commission report shows water and electricity tariffs have surged more than double headline inflation since 2020, casting administered prices into the glare of public scrutiny and handing the antitrust watchdog and policymakers a dossier of indisputable numbers for potential reform.

The inaugural Cost of Living Report, compiled using Stats SA consumer price index data for relevant categories, showed that electricity tariffs have surged 68% and water charges have climbed 50% since 2020, far outpacing the 28% rise in headline inflation over the same period.

The report found that price hikes authorised under the National Energy Regulator of SA’s (Nersa) determinations and municipal tariff frameworks have become unavoidable household budget items, particularly in the lowest income deciles. Electricity accounts for up to 15% of water supply costs, helping to explain why water tariffs have tracked power hikes.

The report comes a week after Eskom reached an out-of-court deal with Nersa, under which it would phase in R54bn in additional charges over the next three years after the energy regulatory bungled its own calculations.

The data quantifies household pain and complicates Reserve Bank governor Lesetja Kganyago’s mission to rein in inflation without throttling an economy, whose already fragile prospects have been whacked by US tariffs. It also heaps pressure on President Cyril Ramaphosa to step up Eskom’s break-up plan, which is meant to unlock private investment and shift price setting to competing power producers.

The commission — which has powers to put every cost item claim from Eskom under the microscope thanks to its anti-monopoly rules — held its enforcement tools in reserve, noting that market inquiries, prosecutions and negotiated remedies “remain on the table”.

“The objective of the report is to identify whether the markets for essential goods and services are working well or not, and to bring more transparency to what is happening with essential products that drive the cost of living,” spokesperson Siyabulela Makunga said.

While enforcement actions such as market inquiries, prosecutions or negotiated remedies remain on the table, Makunga noted that some interventions may require broader collaboration across the government to reform structurally flawed markets, particularly in sectors such as electricity.

“To achieve a deconcentrated, inclusive and growing economy requires a concerted effort across all government departments and regulators,” he said, adding that transparency throughout the value chain is key to exposing opportunistic pricing and ensuring cost reductions are passed through to consumers.

The Organisation for Economic Co-operation and Development, an international body with 38 member countries, has flagged the inflationary effect of steep administered price increases in SA, warning that persistent above inflation utility hikes can make it harder for the Reserve Bank to keep headline inflation within its 3% target.

Households have endured back-to-back, above-inflation tariff shocks. From April 1, Eskom raised its direct-customer rate by almost 13%, and on July 1 municipalities tacked on an average 11%, adding to 19% and 15% hikes in 2024 and 2023. In tangible terms, a Johannesburg prepaid “Homelight 60A” meter now costs R2.84/kWh, up from R2.55 last year, while Cape Town’s domestic tariff starts at R2.92/kWh for the first 600 kWh before jumping to R3.25 thereafter, with a fixed monthly charge of R212.50.

Water tariffs have mirrored this trajectory. In Johannesburg, the domestic rate for the first 6,000l climbed from R20 per 1,000l to nearly R30 in 2025, while large-volume users saw their rate increase from R31 to just over R46.

In Cape Town, the first 6,000l is billed at R31.39 per 1,000l and usage above 35,000l at R53.22 per 1,000l, up from R22.50 and R38.00 five years ago.

Eskom’s standard tariffs have compounded at nearly 15% a year, leaving electricity prices 4.5 times higher than in 2010. Municipal water charges have followed a similar trajectory, quadrupling or quintupling at many metros, meaning households were already paying several times more for basic utilities before the recent above-inflation hikes.

Comparison with the 2020 Essential Food Price Monitoring report shows entrenched pricing patterns despite shifts in cost pressures. Farm-to-producer spreads for bread remain elevated at 77%, while maize meal prices have risen from R38.48 in late 2024 to R43.04 in May 2025 despite stable producer prices.

Sunflower oil margins have held at 40%-45% since late 2023, above pre-Ukraine war levels, despite falling seed costs. Producer prices for eggs fell between December 2024 and March 2025, but retail prices remained high, widening margins after the 2023 avian flu outbreak. Only poultry margins have eased from about 50% in 2020 to below 40% in 2025.

The report’s basket for the poorest households covers 78.45% of their spending. Over the past five years, rentals rose 12%, funeral policy premiums increased 9%, public primary school fees rose 37% and secondary fees 42%, and GP consultation costs climbed 33%, with a 6.6% rise in the past year. Mortgage repayments are up 28% since 2022. Minibus taxi fares remain “sticky downwards”, and once raised after fuel price spikes, they have not fallen. Internet costs have diverged, with wired services up 14% since 2022 and wireless up just 1%.

Data from the Pietermaritzburg Economic Justice and Dignity group shows the average household food basket cost R5,383.38 in December 2024, up 68% from R3,199.86 in December 2019, far above general inflation. Staple foods alone have risen nearly 60% over the same period. In Springbok in the Northern Cape, the basic food basket rose by R450 year on year.

A TransUnion survey found 77% of South Africans are concerned about rising prices, with many cutting back on essentials, seeking extra work or taking on debt. Home loan repayments now cost 40% more than three years ago, and utility bills add nearly R1,880 a month to household expenses.

The commission notes that these domestic pressures mirror global trends. According to the 2025 cost of living index by country, Switzerland, Iceland and Singapore remain among the most expensive places to live, with indices above 79 compared with SA’s 43.2.

Livingcost.org data shows the average monthly cost of living in SA is about $989 — less than half the $2,504 in the US and far below Singapore’s $3,219 — but local affordability is constrained by lower median incomes and steep administered prices.

The World Bank and IMF report that in 2025, food price inflation in many low and middle-income countries remains between five and 10 percentage points above prepandemic levels.

roost@buslinesslive.co.za