Eskom’s Financial Turnaround: Treasury Revises R70bn Debt Relief Package, Saving Government R20bn

South Africa’s National Treasury has announced a significant adjustment to Eskom’s R70 billion debt relief package, resulting in a R20 billion saving for the government. This move comes as part of ongoing efforts to stabilize the embattled utility’s finances and ensure long-term energy security for the country.

Finance Minister Enoch Godongwana unveiled the revised plan during the 2025 Budget Speech, highlighting Eskom’s improved fiscal position since the debt relief was first introduced in 2023. “The Eskom debt relief arrangements are effective and contribute to the improved fiscal position,” Godongwana stated. “Eskom is now in a much better financial position than in 2023.”

What’s Changing in the Debt Relief Package?

The final phase of the debt relief package has been simplified. Originally, the government planned to take over R70 billion of Eskom’s debt. However, this has been adjusted to R40 billion in 2025/26 and R10 billion in 2028/29, saving the government approximately R20 billion. Over the five-year period, the government will have provided Eskom with loans totaling R230 billion, which is R24 billion less than initially projected.

This reduction in financial support is a testament to Eskom’s gradual recovery, though challenges remain. The utility’s revenue increased by 14% to R295.8 billion in the 2023/24 financial year, driven largely by an 18.7% tariff hike. However, electricity sales dropped by 3%, underscoring the need for sustainable solutions.

Eskom’s Ongoing Challenges

Despite the progress, Eskom continues to face significant hurdles. The utility reported a staggering R55 billion loss in 2023/24, attributed to tariffs that fail to cover costs, poor operational performance, and mounting municipal debt. Municipal arrears to Eskom surged from R74.4 billion in March 2024 to R94.8 billion by December 2024, posing a serious threat to the utility’s financial stability.

To address these issues, Eskom requested a 36.15% tariff increase for 2025/26. However, the National Energy Regulator of South Africa (Nersa) approved only a 12.74% increase, effective from April 1, 2025. Additional increases of 5.36% and 6.19% were approved for the following two financial years, falling short of Eskom’s requests.

Government Initiatives to Stabilize the Energy Sector

The Treasury’s 2025 Budget also highlighted several initiatives aimed at stabilizing South Africa’s energy sector. The Electricity Regulation Amendment Act (2024), which took effect on January 1, aims to establish a competitive market for long-term energy security. Preparations are underway to license the National Transmission Company of South Africa as a market operator, with market rules and procedures being finalized.

Additionally, the government is considering unbundling electricity tariffs into their different cost components to enhance transparency and facilitate a competitive wholesale market. Projects under the 360-megawatt battery storage programme are nearing completion, with construction set to begin soon.

Private Sector and Renewable Energy

The private sector is playing an increasingly important role in South Africa’s energy transition. Raising the embedded generation licensing threshold has spurred private-sector energy projects, with the 2024 South African Renewable Energy Grid Survey identifying 133 gigawatts of potential in wind, solar, and battery storage. However, grid expansion remains critical to support these projects.

Alberto Gambacorta, General Manager (Sub-Saharan Africa) for energy producer Scatec, welcomed the government’s commitments, stating, “Today’s Budget Speech comes at a pivotal moment for the country’s energy sector. As we navigate the ongoing energy transition, it is encouraging to see government support for investment in renewable energy.”

Looking Ahead

Eskom’s latest financial plan targets profitability from 2026/27 onwards. However, escalating municipal debt and operational inefficiencies continue to pose risks. The debt-relief arrangement, introduced via the Eskom Debt Relief Act (2023), aims to strengthen the utility’s balance sheet, enabling restructuring and investment in maintenance for a stable electricity supply.

Labour federation Cosatu praised the efforts of Eskom and municipal workers in overcoming load-shedding but stressed the need for further support to tackle corruption, wasteful expenditure, and cable theft. “Affordable electricity is vital for the survival and growth of the economy, particularly in mining and industry,” Cosatu noted.

The adjustment to Eskom’s debt relief package marks a significant step in the utility’s financial recovery journey. While challenges remain, the government’s commitment to stabilizing the energy sector and fostering private-sector investment offers hope for a more sustainable and resilient energy future. As South Africa navigates this critical transition, the focus will remain on balancing fiscal responsibility with the urgent need for reliable and affordable electricity.

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