IN a year marked by unprecedented financial losses and operational setbacks, Eskom, South Africa’s embattled state-owned power utility, is cautiously optimistic about its future.

Despite recording its largest-ever loss of R55 billion in the financial year ending March 2024, Eskom forecasts a return to profitability by March 2025, with projected earnings of more than R10bn.

However, beneath this promising outlook lies a complex web of financial, governance, and operational challenges that threaten to undermine the utility’s long-term sustainability.

Eskom’s financial woes were laid bare during a marathon session before the Standing Committee on Public Accounts (Scopa) in February. The R55bn loss for the year ending March 2024 was largely due to complex accounting adjustments related to the unbundling of its transmission business, a move that forms part of a broader restructuring effort.

Despite these challenges, Eskom has received substantial government support, including R66bn in debt relief for 2025 and R40bn for 2026, which includes conditions for conversion into equity.

However, the utility’s financial health remains precarious. Municipal debt, now sitting at a staggering R74.4bn and projected to reach R100bn by March 2025, remains Eskom’s most pressing threat.

Of the 71 municipalities participating in Eskom’s debt relief programme, 67 have defaulted on payments, with 13 classified as chronic defaulters. “Municipal debt is not just an Eskom problem; it’s a national crisis,” Deputy Minister of Energy and Electricity Samantha Graham-Mare, said.

The absence of load shedding for at least nine months marked a significant operational achievement for Eskom. This milestone has been attributed to increased planned maintenance and improved monitoring of power stations, which have enhanced the utility’s energy availability factor (EAF) to 62.97% in the first half of the 2025 financial year.

The return of critical units at power stations such as Medupi and Kusile could further bolster generation capacity, potentially paving the way for a permanent end to load shedding by March 2025.

Eskom’s group chief executive, Dan Marokane, outlined a two-year generation recovery plan aimed at increasing the EAF from 55% to 70% by April 2025. “We are not out of the woods yet, but we are making progress,” he said. The utility’s improved financial performance has also boosted investor confidence.

Standard & Poor’s recently upgraded Eskom’s outlook from stable to positive, and the utility plans to achieve investment-grade status within the next two to three years.

Despite operational gains, Eskom continues to grapple with deep-seated governance and financial issues. The utility received a qualified audit opinion for the 2023/24 financial year, highlighting material misstatements and significant internal control deficiencies. Irregular expenditure remains a concern, with procurement processes marred by abuse and inefficiency.

The ANC’s Helen Neale-May highlighted that Eskom’s financial statements had contained misstatements for eight consecutive years, with no significant improvement in internal controls. “There is a culture of malfeasance by frontline employees and senior managers, including their family members, making it a sophisticated network of milking the state,” she said.

Eskom’s group chief financial officer, Calib Cassim, admitted that the utility’s financial reporting processes were fraught with challenges. “Eskom is a complex business. Producing financials free of significant adjustments by the end of May is not feasible,” he said.

The inability to recover electricity payments from municipalities is a critical challenge. With only a fraction of municipalities meeting their obligations, the arrears debt is projected to reach R110bn by March 2025. Additionally, electricity theft continues to drain Eskom’s resources, with losses estimated at R23bn annually.

The committee also raised alarm over Eskom’s prepaid voucher system, which is reportedly riddled with fraud and corruption. Members cited instances where vouchers were sold illegally for as little as R500 for 1 000 units, resulting in substantial revenue losses. “Eskom’s voucher system is not secure. It’s a free-for-all,” the MK Party’s David Skosana said.

Monde Bala, Eskom’s group executive, acknowledged the system’s vulnerabilities and revealed that Eskom was working on replacing the outdated system within the next 18 to 24 months. In the interim, additional security measures have been implemented to curb fraud.

Eskom’s path to long-term financial sustainability is fraught with obstacles. While government support and operational improvements offer some respite, the utility requires substantial tariff increases and a sustainable solution to municipal debt to ensure its viability. The need for robust governance reforms and effective accountability measures is paramount to addressing systemic failures and restoring public trust.

Eskom’s request for a 36.1% tariff increase for the 2025/26 period, of which only 12.7% was approved by the National Energy Regulator of SA (Nersa), sparked heated debate. Members argued that such increases would place an unbearable burden on low-income households and struggling businesses.

ActionSA’s Alan Beesley questioned the justification for the steep increase, given the financial pressures faced by South Africans. “How can Eskom justify a 36.1% increase when so many are struggling to make ends meet?” he asked.

Cassim defended the request, stating that Eskom needed to cover its cost of capital, which currently stands at 11%. “We are only receiving 1.7% despite a recent increase to 6%. This tariff increase would make a significant difference,” he said.

Eskom’s journey towards recovery is marked by both progress and persistent challenges. As the embattled state-owned power utility navigates this complex landscape, it must confront its systemic failures head-on to secure a stable financial and operational future. The coming months will be crucial in determining whether Eskom can sustain its momentum and overcome the deep-seated issues that have plagued it for years.

The hearing concluded with a call for Eskom to submit its interim financial statements promptly and to continue strengthening its governance structures. While the utility has made commendable strides, the spectre of its past failures serves as a stark reminder that the journey to stability is far from over.

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Despite record losses, Eskom aims for profitability — a deep dive into its challenges