Today’s Insight
Eskom’s recent “return to profit” and promises of a new dawn in the power system are largely an accounting and messaging victory, not a structural fix, which leaves business leaders heavily exposed to price, policy, and reliability risk over the next decade unless they aggressively accelerate their own generation strategies now. For large users, the rational response is to treat Eskom’s numbers as a warning label, not a comfort blanket, and lock in long‑term cost and security via well‑structured solar Power Purchase Agreements (PPAs) with zero capex.
Eskom’s profit is not your risk hedge
Eskom has reported a profit before tax of about R23.9 billion for FY2025 and roughly R32.5 billion for the first half of FY2026, after eight years of losses, driven mainly by a double‑digit tariff increase, diesel savings, and accounting adjustments rather than genuinely stronger balance‑sheet resilience. Yet the utility itself concedes that the first half of the year is seasonally stronger, that cash remains tight, and that its longer‑term sustainability still depends on further tariff hikes, debt relief and favourable regulatory treatment.
The Energy availability factor (EAF) remains the “one number Eskom keeps missing”, with recent analysis showing that performance has either stalled or regressed against targets, even as the communication narrative pivots to “no load‑shedding since May”. At the same time, Eskom is launching its Load Reduction Elimination Strategy and smart‑meter rollout in high‑risk areas. A welcome step for system integrity, but also a confirmation that theft, non‑technical losses and local grid instability remain entrenched risks in many networks.
Wage pressure and the next tariff shock
Before primary energy costs, new build, arrear‑debt write‑offs or the R54 billion error are even factored in, Unions have unsurprisingly based their wage demands on Eskom’s recent reported profitability, rejecting the company’s initial offer. They are now pushing for a substantial across-the-board increase under a one-year agreement, along with significantly enhanced benefits such as a R7,000 housing allowance, cell phone and electricity allowances between R1,500 and R2,000, a R220 live line allowance, a R200 standby allowance, and an employer contribution covering the majority of medical aid costs. They argue that these improvements are essential to offset continuous inflation and rising living expenses, especially considering the sacrifices workers have made during difficult times.
This sits on top of Eskom’s warning that tariffs will have to rise by more than 10% annually over the next five years to recover the infamous R54 billion regulatory error that was kept out of the public eye for months, even as government trumpeted a turnaround story. In practical terms, executives should assume that grid‑supplied electricity costs will escalate materially faster than CPI for the rest of this decade – not as a tail risk, but as the base case.
Municipal arrears, DAAs and the politics of “free” power
Eskom’s R105 billion municipal arrear‑debt problem has become systemic, and the latest move is to prioritise 14 municipalities for Distribution Agency Agreements (DAAs) in an attempt to stabilise collections and improve network performance. The strategy is conceptually sound, centralise revenue management and technical control, but it rests on one fragile assumption: that households currently using unpaid electricity to fund food and essentials will start paying simply because the counterparty changes.
At the same time, the push to eliminate load reduction is explicitly linked to free basic electricity, typically 50 kWh per month, for indigent customers, supported by smart meters and targeted municipal programmes. While this may be socially necessary in South Africa, it also creates a powerful expectation dynamic: when electricity is free for some, it becomes increasingly difficult, politically and socially, to ring‑fence non‑payment, and middle‑to‑large paying customers become the de facto backstop through higher tariffs and cross‑subsidies.
A more effective long-term approach might be to offer a lower tariff rate rather than free electricity. Instead of providing the first 50 kWh for free, consumers could be encouraged to pay a reduced rate, a sliding scale of 25 to 50% of the standard local tariff, for their initial 100 to 200 kWh. This strategy would reinforce the importance of paying for electricity services, helping to foster a culture of payment and responsibility, while avoiding further strain on the economy through expanded social spending.
Industrial pricing: one sector cannot be saved in isolation
South Africa’s ferroalloy and ferrochrome producers are pushing an electricity pricing model that does not require explicit subsidies, recognising that current tariffs are killing smelter competitiveness and threatening jobs along an energy‑intensive value chain. Yet every large manufacturing, mining and processing operation with high monthly consumption is in a similar position: exposed to administered pricing, regulatory uncertainty and Eskom’s capacity constraints, regardless of whether a specific “rescue” tariff is granted to one sub‑sector.
If Eskom selectively “saves” one heavy user segment without a transparent, broad‑based cost‑reflective structure for all industrial customers, the result is distorted price signals, arbitrage opportunities, and crowded‑out investment elsewhere in the economy. For executive teams, this is the critical strategic insight: waiting for Eskom or government to fix industrial pricing is effectively outsourcing your competitiveness to a political process over which you have minimal control.
Paper turnaround, real‑world fragility
Eskom’s own communications acknowledge that its FY2024 loss before tax of R25.5 billion was followed by FY2025 profitability largely due to a once‑off tax asset derecognition, debt relief, tariff hikes and reduced diesel spend, not because the organisation suddenly became structurally cash‑generative. The most recent interim results highlight a R24.3 billion profit after tax in the first half of FY2026 and a 41% jump in profit before tax to R32.5 billion, impressive on paper, but still accompanied by warnings about second‑half pressure, municipal arrears, non‑technical losses and capital‑expenditure needs for life‑extension, grid strengthening and new build.
Overlay this with:
- A still‑underperforming EAF relative to targets, despite political incentives to declare “the end of load‑shedding”.
- Escalating wage demands that are very likely to settle materially above inflation.
- The R54 billion regulatory error being loaded into future tariffs.
- Ambitious plans for new nuclear capacity, which carry long‑dated capital, cost and schedule risk.
The conclusion is unavoidable: Eskom is making progress, but its risk profile for large users remains high, and the direction of travel for grid‑supplied tariffs is sharply upwards through at least the early‑to‑mid 2030s.
What this means for leadership strategy
For boards, CFOs and COOs, the Eskom narrative must be reframed as follows:
- The utility’s profitability is necessary for macro‑stability but does nothing to de‑risk your individual cost curve or uptime requirements.
- The compounding effect of wage settlements, regulatory corrections (R54 billion), municipal arrears solutions and social‑policy commitments will keep pushing tariffs higher, with little room for reversal.
- The political logic of free and subsidised electricity for vulnerable households structurally embeds cross‑subsidisation from formal‑sector customers with the ability to pay, i.e. your business.
In this environment, postponing a distributed‑generation strategy is no longer a neutral choice; it is an active decision to remain exposed to an administered price path and operational risks that have already wiped-out margins in multiple energy‑intensive sectors. The window in which solar and storage can be procured under relatively favourable conditions, before the next wave of tariff hikes and grid constraints, is closing.
Why move to solar now – and why via a PPA
A well‑structured solar PPA allows large energy users to:
- Lock in long‑term electricity at a discount to Eskom’s current and projected tariffs, with escalation agreed upfront, converting a volatile, politically mediated cost into a predictable operating expense.
- Eliminate capex and balance‑sheet strain by shifting project financing, construction and performance risk to the PPA provider, while still capturing the benefit of lower, cleaner energy over 10–20 years.
- Reduce exposure to EAF volatility, wage‑driven tariff shocks, municipal arrears contagion and the political economy of “free” power by generating a significant share of consumption behind the meter.
For business leaders and owners, the strategic question is no longer “Should we go solar?” but “How aggressively can we move load off Eskom without compromising core operations and liquidity?” A PPA model is particularly powerful because it enables that shift at speed and scale, without tying up scarce capital that could otherwise drive growth, acquisitions, or operational excellence.
TBG SA structures PPAs with zero capital outlay and tariff levels designed to undercut Eskom’s delivered cost of energy from day one, with savings widening as regulated tariffs compound over time. While Eskom and government debate wage deals, DAAs, nuclear studies and error recoveries, your executive team has the option to take a direct, measurable step to de‑risk your business: convert a portion of your load to contracted solar now, before the next five‑year tariff and regulatory cycle locks in another round of above‑inflation increases.
Eskom, EWN, MyBroadband, Central News, ENCA, Engineering News, MiningMX, Moneyweb, NERSA, TBG SA