The Legacy of Artificially Low Tariffs

For decades, South Africa maintained some of the lowest electricity prices on the continent—a policy that initially boosted industrial growth but has now backfired spectacularly. Professor Sampson Mamphweli, Head of Energy Secretariat at SANEDI, explains that these artificially suppressed tariffs created a ticking time bomb. "Our electricity price was too low to attract investment or properly maintain infrastructure," he states. The fundamental issue was that tariffs failed to match the actual cost of generation, especially as Eskom's coal fleet aged and required more expensive maintenance. This pricing mismatch forced the government to provide repeated bailouts—R238 billion since 2008—simply to keep the lights on, while deferring the inevitable cost reckoning to future consumers.

The Perfect Storm: Medupi, Kusile and Their R400 Billion Burden

The conversation turns to South Africa's most expensive infrastructure projects—the problem-plagued Medupi and Kusile power stations. Originally budgeted at R163 billion, their costs ballooned to over R400 billion due to design flaws, corruption, and mismanagement. While Mamphweli argues these plants will prove their worth over their 40-60 year lifespan, their immediate impact has been catastrophic for electricity prices. "The country faced a difficult choice—abandon these projects and write off the investment, or pour more money into completing them," he notes. The decision to continue has meant these costs are now being baked into current tariffs, contributing significantly to the 450% price increase since 2007.

The Renewable Energy Paradox

South Africa's renewable energy program (REIPPPP) presents another complex layer. Early contracts paid independent power producers premium rates—up to R2.50/kWh when Eskom's average generation cost was R0.80/kWh. "We essentially subsidized renewables through artificially low coal-generated electricity," Mamphweli explains. While this helped launch the renewable sector and brought prices down (new solar projects now under R0.60/kWh), the initial costs were incorporated into general tariffs. The expert suggests this model could potentially be reversed, with cheaper renewables now helping offset more expensive coal generation.

A Glimmer of Hope? SANEDI's Mandate for Solutions

With Electricity Minister Kgosientsho Ramokgopa tasking SANEDI to review the pricing framework, Mamphweli outlines potential areas for intervention:

1. Tariff restructuring: Possibly separating generation, transmission, and distribution costs
2. Renewable integration: Leveraging cheaper renewables to offset coal costs
3. Targeted subsidies: Direct assistance for low-income households rather than across-the-board price suppression
4. Municipal finance reform: Alternative models for maintaining distribution networks

However, he cautions there are no magic bullets. "We're dealing with decades of accumulated challenges. Solutions will require difficult trade-offs between affordability, sustainability, and service quality."

The Human Cost of Energy Poverty

Behind the technical explanations lies a stark human reality. Over 4-5 million South African households still lack electricity access, while those connected face mounting bills consuming ever-larger portions of income. Recent protests in Thembisa highlight growing desperation. "When people spend 15-20% of their income just on electricity, something is fundamentally broken," Mamphweli acknowledges. The crisis threatens to reverse hard-won gains in electrification and economic inclusion.