The impact of Eskom's bailout reduction on South African households

Rein Snoeck Henkemans

South Africa’s energy crisis has long placed households and businesses under immense financial strain. Now, with the latest announcement in the 2025 National Budget Speech that government will be reducing Eskom’s bailout package, that burden is set to increase even further.

While this decision may appear to signal a shift towards financial sustainability, the reality is that the costs are simply being offloaded onto consumers through rapidly escalating tariffs, higher fixed charges, the looming imposition of registration fees, and the removal of critical tax incentives. With no clear plan in sight to address the issue of energy affordability, South Africans must ask: How much more will they be expected to pay before real solutions are introduced?

Rising tariffs and charges

The Budget Speech emphasised the government's commitment to stabilising the electricity supply and fast-tracking energy reforms through Operation Vulindlela. This includes a pipeline of projects expected to add 22 500 MW of new generation capacity, with over 10 000 MW already registered with National Energy Regulator of South Africa (Nersa). However, while large-scale projects are crucial, these solutions do not address the growing financial hardship facing consumers and businesses.

Nersa has approved a 12.7% increase in electricity tariffs for the 2025/26 fiscal year, effective from April 1, just ahead of the higher rates and demand expected during winter. This hike is part of a broader restructuring of Eskom’s pricing model, which also includes raising fixed network charges to offset revenue losses as more consumers switch to alternative energy sources like solar power.

The impact on households will be significant, particularly for low-consumption users who may face substantially higher fixed non-generation costs for transmission and distribution. For homeowners who have invested in solar energy to avoid rising electricity costs, the situation is concerning, as fixed service charges and tariff restructuring could erode the long-term benefits. There is also an urgent need for greater transparency around how these charges are calculated and whether they truly reflect fair grid usage costs.

New registration fees in 2026

Meanwhile, new regulations require solar users to register their systems with Eskom, with non-compliance penalties of up to R6 052 set to take effect after March 2026. While Eskom’s extension of registration fee exemptions for small-scale embedded generation (SSEG) until then offers temporary relief, it doesn’t address the broader issue of long-term affordability. As a result, consumers who have switched to solar but remain partially connected to the grid as a back-up are being penalised, even though they are helping to ease the pressure on the struggling utility, contributing surplus power to the grid, and supporting the country’s transition to greener energy.

End of solar tax incentives

There is still some uncertainty around the phasing out or continuation of Section 12BA, which was originally set to end on February 28. This tax break has been crucial in helping businesses manage high electricity costs, reduce dependence on Eskom, and invest in renewable energy infrastructure.Without replacement incentives or support, businesses could struggle to justify further investment in alternative energy, slowing down progress at a time when South Africa desperately needs private sector participation in the energy transition.

The absence of clarity in the Budget Speech on future renewable energy incentives leaves businesses in the dark – literally and figuratively – on how they can continue to manage energy security.

Sustainable solutions needed

In response, industry leaders, including Alumo Energy, are calling for greater transparency on energy pricing structures and renewed incentives for solar adoption. South Africa’s energy future must be built on innovation and long-term affordability, not short-term revenue collection at the expense of households.

A truly sustainable energy transition must ensure that the cost of reform does not continue to fall squarely on consumers and businesses. Policymakers need to implement mechanisms that address inefficiencies within Eskom before relying on tariff hikes and restrictive regulations as financial crutches. South Africans have taken steps towards energy independence, but they should not be unduly burdened for doing so.

Rein Snoeck Henkemans is a solar expert and CEO of Alumo Energy 

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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