SA has the highest unemployment rate in the world. With a Gini coefficient of 0.67, it also has the highest income inequality in the world, and it has continued to increase post-apartheid.
The Stats SA inequality trends report shows that the provision of services such as electricity are still race and income based; white people and wealthy people have almost 100% access to electricity from the mains.
The report also shows that the richest 10% of SA households are responsible for 52% of all expenditure, while the poorest 10% account for only 0.8% of all expenditure.
SA is a land where, according to the Bureau of Market Research, 75% of the employed adult population earn below R5,800 a month. This is in contrast to 3.8% of the population that earns more than R48,000 a month.
This is the same country where electricity tariffs have been rising exponentially since 2010, largely driven by historically depressed tariffs that were politically motivated. This resulted in underinvestment, and then a lack of maintenance, which eventually led to crippling load-shedding.
The favoured solution to these problems has been tariff hikes, and they have been increasing at an average of 15% a year since 2010 to allow for new capacity, electrification, maintenance and other operational expenditure. The two main cost drivers for Eskom since then have been primary energy costs (coal and diesel) and independent power producers.
SA needs to consider the adoption of a heavily subsidised flat tariff for people below a certain income level
However, we are not alone. Namibia recently introduced regional electricity distributors (Reds) despite there being no tariff cost reflectivity. Reds don’t directly set the electricity tariffs consumers pay, but they are directly affected by the bulk electricity tariff hikes.
NamPower was granted a tariff increase in July 2024 along with previous tariff rationalisation for the Reds, which resulted in higher electricity costs for Namibian households. Two days before Namibians were planning to take to the streets in protest, mines & energy minister Tom Alweendo decided to cancel the 8% tariff hike. The government decided to make available N$365m to subsidise electricity consumers for the 2024/25 financial year.
We need to rid ourselves of the notion of cheap electricity — there is no such thing. Most South Africans cannot afford the true cost of electricity. Energy costs are a major inflation driver, and, as a result, any tariff increase will always be emotive because its effects are immediate.
Similarly, municipalities cannot provide quality services to deeply unequal societies. SA’s social compact is broken because the 3.8% who earn above R48,000 are also overstretched and overtaxed and are unwilling to subsidise the 75% any more than they already do.
First prize would be to have a functional economy that is inclusive, transformative and focused on lifting every member of society out of poverty. This would ensure a broader economic base from which to collect tax revenue, but also a population that can contribute to economic growth.
In the absence of this, tariff models need to be adjusted. While important, tariff subsidies and free basic electricity cater for only a tiny portion of the population, and only if they adhere to the administrative burden that is required to be declared indigent.
SA needs to consider the adoption of a heavily subsidised flat tariff for people below a certain income level, so they can buy electricity at tariffs that don’t compete with food and housing. A flat tariff would allow for greater payment adherence and reduced tampering as people can budget better, and could be coupled with technology solutions such as mass deployment of solar to offset daytime consumption.
Every country needs to focus on energy security, affordability and decarbonisation of the system, in this order. The truth is that the more you modernise the electricity system the more money you will have to spend. This will require funding, which eventually means higher tariffs — the very tariffs that may lead to our Damascene moment.
• Mashele, an energy economist, is a member of the board of the National Transmission Company of SA.
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