The news:
- South African energy giant Eskom has introduced a bold Profit Maximisation Programme (PMP), targeting a R12 billion ($686.2 million) profit by 2026 after six consecutive years of losses.
- This comes as Eskom seeks to rebound from a disastrous 2023, where it reported a staggering R23.9 billion ($1.4 billion) loss, its worst financial performance on record.
- Despite its struggles, Eskom's leadership remains optimistic about the future, with hopes to break even by the 2025 financial year.
The PMP outlines several cost-saving measures to reduce the utility’s reliance on government bailouts and cut operating expenses. The programme is part of a two-year turnaround strategy to ensure the long-term financial sustainability of Eskom.
The utility's financial woes began in 2006, when the company began dealing with growing revenue shortfalls, which have now accumulated to R535 billion ($30.6 billion), up from R1 billion ($57.2 million).
Eskom's debt burden currently stands at R445 billion, with annual debt-servicing costs exceeding R40 billion ($2.3 billion). This has severely hampered the company’s ability to invest in new infrastructure and maintain its existing assets.
However, Eskom’s leadership has seen improvements in the first quarter of its 2025 financial year, reducing its pre-tax loss to around R200 million ($11.4 million), a significant improvement from the R6.9 billion loss recorded during the same period in 2023.
This progress is largely due to a reduced reliance on expensive open-cycle gas turbines (OCGTs) and the introduction of a 13% electricity price hike in April 2024.
The utility saved R10.6 billion ($606.2 million) between April and August 2024 by cutting down its diesel usage for OCGTs, spending R3.59 billion ($203.6 million) on diesel compared to R14.4 billion ($823.4 million) the previous year.
However, more drastic measures are needed to meet its cost-saving target of R16.2 billion ($926.4 million) for the 2025 financial year. These "quick wins" include improving efficiency, collecting outstanding municipal debt, reducing theft, and identifying new revenue streams.
Eskom’s CEO, Dan Marokane, remains confident that the PMP will successfully position the utility for financial recovery. If the plan continues as projected, Eskom expects to achieve a 10% profit margin by 2026.
Despite this optimism, Eskom’s proposed price hikes for the coming years have sparked controversy. The utility is seeking a 36.15% increase for the 2026 financial year, followed by hikes of 11.81% and 9.10% for the subsequent years.
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The steep price increases have drawn criticism from government officials, with Electricity Minister Kgosienstho Ramokgopa hinting at potential intervention to offer consumers relief.