Eskom’s profit after tax more than doubled to R30.3 billion in the year to 31 March 2026. However, falling electricity sales, rising municipal arrears and continued reliance on government support mean the utility remains financially vulnerable.
Eskom reported its second consecutive profitable year this week, saying its turnaround strategy had strengthened financial stability, operations and energy security despite declining industrial demand and the growing shift towards renewable energy.
For many South Africans, a year without load-shedding may feel like a victory. But rising electricity prices are fuelling public concern. President Cyril Ramaphosa and Electricity and Energy Minister Kgosientsho Ramokgopa have reportedly suggested increasing the monthly Free Basic Electricity allocation for qualifying households from 50kWh to between 200kWh and 300kWh.
Profit rises as electricity sales decline
Eskom’s group profit after tax rose to R30.3bn from a restated R14bn in 2025. The utility attributed the improvement to better cost control, improved generating-plant availability and lower reliance on emergency diesel generation.
Revenue increased by 4.1%, supported by a 12.74% regulatory tariff increase. This was partly offset by a 6.2% decline in sales volumes to 178TWh.
Eskom said weaker industrial demand, embedded self-generation and energy-efficiency measures contributed to the decline.
The improvement in profitability was also supported by lower diesel use. Energy expert Andile Nchabaleng said Eskom had cut diesel procurement by 90%, resulting in savings of about R30bn.
Democratic Alliance energy spokesperson Kevin Mileham welcomed the reported profit but said it should be considered in the context of almost R500bn in government support over the past five years.
Eskom chief financial officer Calib Cassim said government debt-relief support had helped to free up cash for reinvestment in the business rather than debt servicing.
“Government’s debt-relief support has been a critical enabler, freeing up cash from operations to be reinvested in the business – notably the generation recovery plan,” Cassim said.
Falling demand reflects a changing market
Eskom has received positive credit-rating actions from S&P Global, Fitch and Moody’s. The utility says improved ratings should help reduce borrowing costs and support future capital expenditure.
At the same time, the electricity market is changing. Businesses are increasingly investing in renewable energy, entering into wheeling agreements and buying power directly from independent producers.
Standard Bank Corporate and Investment Banking head of power and renewables Rentia van Tonder said Eskom’s falling grid-supplied volumes needed to be viewed alongside increased private-sector generation.
Private renewable-energy projects are supplying large corporate customers, including mining companies, either directly or through traders and aggregators. The main drivers are lower costs, supply certainty and corporate sustainability commitments.
Van Tonder said battery storage was also becoming more important as renewable-energy projects expanded.
“Consumers and industrial users are driven by cost,” she said. “The overall driver should be a least-cost generation portfolio that reduces costs and supports economic growth.”
An online search by The National shows that wind and solar now account for about 20% of national generation capacity, that coal supplies 70%, and that industrial and business users account for appriximately 55%-60% of electricity demand.
Municipal debt remains a major risk
Eskom’s municipal debt remains its biggest financial threat: arrears increased 17.9% to R111.6bn at year-end and reached about R119bn by June 2026, with projections of up to R358bn by the 2031 financial if further decisive intervention is not implemented, the utility warned the results.
Municipal debt threatens Eskom’s cash flow and its ability to maintain and expand the electricity network. Eskom and government have been pursuing measures to improve municipal billing, revenue collection and payment compliance.
Restructuring creates uncertainty
The planned separation of Eskom’s generation, transmission and distribution businesses is another source of debate.
Nchabaleng argued that removing transmission revenue from the broader Eskom business could weaken its financial position.
“This could be the last profit Eskom ever enjoys. Once transmission assets are stripped off, Eskom will plunge into a loss-making entity,” he said.
This unbundling of Eskom is part of the state's plant to create an independent, state-owned transmission system operator and attract new investment into the electricity sector.
Affordability remains the central test
Electricity prices have risen sharply since the 2008 financial crisis.
Eskom’s improved operating performance is positive, but profitability alone does not demonstrate long-term sustainability. The utility still faces high debt-servicing and capital-investment requirements, municipal arrears, changing electricity demand and political pressure to keep tariffs affordable.
As Van Tonder said: “The overall objective should be lower electricity costs to the consumer.”
edward.west@nationalmg.co.za
THE NATIONAL