By Jasper Raats and Vida Booysen
Nersa, the national energy regulator, has approved a significantly smaller increase to electricity tariffs than the 36,15% requested by Eskom in its sixth multi-year price determination. Nevertheless, consumers will be forking out at least 12,74% more for their electricity in the 2025-’26 financial year.
“While we expect the 12,74% increase to still have a negative impact on the country’s economy and productivity, we believe it will be significantly less than what it would be in the event of an increase of more than 36% as requested by Eskom,” said Nomfundo Maseti, acting electricity regulator of Nersa, at a conference where the tariff increase was announced.
She said the 36,15% tariff increase that Eskom wanted would have reduced South Africa’s productivity by 3,34%.
“Nersa’s approved 12,74% increase limits this productivity decrease to 1,24 percentage points.”
Eskom will only get 5,36% for 2026-’27 instead of 11,81%, and 6,91% for 2027-’28 instead of 9,1%.
“We believe that this decision creates the necessary balance between the needs of Eskom and the financial realities of consumers,” said Nersa’s chairperson, Thembani Bukula.
Nersa received more than 1 200 written comments from stakeholders to express their concerns about issues such as affordability, Eskom’s performance, the impact of negotiated price agreements, municipal debt, and the need for better consultation by Eskom and the municipalities, among others.
“Nersa recognises the problems faced by consumers and the importance of ensuring that electricity remains affordable, while also ensuring Eskom’s financial sustainability,” Bukula added.
Too much for many
Dr Theo de Jager of the farmers’ association Saai is concerned about the impact that a 12,75% increase will have on the agricultural sector, even though it is lower than many farmers feared.
“Agriculture currently spends about R10 billion per year on electricity from Eskom. This means that the company will be paid a further R1,27 billion [by agriculture] this year. This is money that farmers did not budget for, so it comes out of their profits. Unlike other industries, farmers cannot pass on the price increase to their customers. We are price takers.”
“This also comes along with other increases in administered costs such as minimum wages, tolls, diesel and all sorts of taxes, which the state imposes on farmers.”
De Jager is concerned that the 12,75% increase could mean the difference between progress and ruin for many farmers. He believes the tariff increase could be a watershed for irrigation, pig, chicken, dairy and fresh-produce farmers in particular. “They will feel it the most.”
He recommends that farmers who qualify for Land Bank loans should apply for financing for green energy projects through the Agro Energy Fund. This fund was set up specifically to assist energy-intensive farms in acquiring new green energy installations. The fund has just over R1,2 billion available to finance green energy for existing businesses and for new farming businesses.
Solar energy competition
From Maseti’s presentation, it was clear that both Eskom and Nersa are concerned about the competition that the state-owned entity is facing from private power generation.
Bennie van Zyl, CEO of the TLU SA farmers’ organisation, said that although the price increase is significantly lower than expected, Eskom will still struggle to compete with private generation.
“It is all well and good for Eskom to boast about the 300 days without loadshedding, but load- reduction, or punitive power as some people call it, is still being applied in many parts of the country. The outcome for consumers is the same as loadshedding.
“Eskom has proven itself to be an unreliable power supplier that struggles to provide power sustainably. This means that anyone who needs a sustainable power supply must look at alternative power sources.”
In the meantime, solar power has become cheaper and more efficient. He believes that with better battery technology, it is becoming increasingly attractive.
“There are so many facets of agriculture that cannot afford a minute of power loss. Just think of the cold chain or the hubs that must be switched back on after a power outage, or of vegetable tunnels that must be cooled. In these industries, any power outage means a loss of production and consequently a loss of income. Now there are reliable and cheaper alternatives.”
Solar investments
G3 Citrus Estate, a farm at Weipe in Limpopo, indicated a day before Nersa’s announcement that it would be expanding its existing 782 kWp (kilowatt peak) grid-connected solar power system with an additional 812 kWp of solar panels and a 2,28 MWh (megawatt hour) battery bank.
This upgrade will cover approximately 90% of the estate’s energy needs, supporting both current and future operations. This will enable G3 to expand beyond Eskom’s power restrictions without compromising production, while simultaneously reducing carbon emissions and ensuring energy security.
Meanwhile, the Green Farms Nut Company (GFNC) that is one of South Africa’s largest macadamia nut processors and exporters, now boasts a solar power system at its Levubu plant in Limpopo. This system meets 60% of the plant’s energy needs.
This includes a 300 KVA (kiloVoltAmpere) solar power generation capacity and 600 kWh battery storage that can provide backup power for up to three hours in the event of a solar system failure.
From February, a larger 500 KVA solar power system with 1 000 kWh battery storage will be operational at GFNC’s White River plant. This system combines roof and ground-mounted solar panels to reduce grid dependency and provides backup power for up to three hours.
GFNC’s processing plants depend on a steady power supply, and loadshedding causes significant operational problems. The six to seven hours of power outages daily, and the multiple diesel generators that each consume up to 75 litres of fuel per hour, increased GFNC’s operating costs too much.
“These costs are unsustainable in the long-term. Making matters worse is that frequent loadshedding and other power outages also damage equipment, increase maintenance costs and limit production capacity,” GFNC’s chief operating officer, Michka Reynders, explained.
Solar Africa’s chief executive, David McDonald, says that for the past few years Eskom has been demanding deliberately inflated tariff increases from Nersa so that Eskom can actually get a more realistic increase, but that is still above the inflation rate.
“It is, therefore, not surprising that Nersa has still granted Eskom a double-digit increase for the 2025-’26 financial year. It is only a third of what the power supplier initially requested.”
McDonald believes this is still a hefty price increase that will hit businesses hard. “Just to put this into context: a 1 MVA user’s annual electricity expenditure will increase by about R2,3 million. If you look at a sector where workers normally earn about R50,00 per hour, this increase is equivalent to 22 permanent jobs.”
Although McDonald believes that the price increases for 2026-’27 and 2027-’28 will be contested, he points out that the tariff increases in the next few years will still be above the inflation rate.
“If [these increases somehow do] not happen, the result will be that double-digit increases will be introduced in 2028-’29 to compensate for the lower increases in the previous years”.
