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Hillside: South32’s aluminium smelter in KwaZulu-Natal. Picture: Supplied
Hillside: South32’s aluminium smelter in KwaZulu-Natal. Picture: Supplied

South Africans are facing further astronomical electricity tariff increases of 36% from 2025 as Eskom battles financial headwinds on multiple fronts.

Electricity & energy minister Kgosientsho Ramokgopa said last week, in an address to participants at the Windaba Conference, that he considers any tariff hike above 20% (still eye-watering) to be “untenable” and — as if we needed to be told — that a 36% increase would have serious implications for inequality and economic competitiveness.

Purportedly to alleviate this, Ramokgopa indicated that the government’s “first consideration in revising the tariff” is a delay in the implementation of the carbon tax for Eskom, which is set to kick in for the first time in 2026 (already six years later than for everyone else). The tax would reportedly make up about 1.6% of the utility’s proposed 36% increase.

Acknowledging the downside of this proposal for South Africa’s image as a country that takes climate change seriously, Ramokgopa resorted to the lazy “balancing act” defence that all politicians use in resisting climate action, saying: “Of course introduce it [the carbon tax] and then people are into poverty, so of course those are the difficult choices we have to make.”

This is a patently ridiculous comment. It is the economic carnage wrought by two decades of mismanagement and corruption at Eskom that has helped push millions into poverty, not the potential introduction of a carbon levy.

Touting a delay in the carbon tax as a deft solution to unsustainable tariff hikes is a performative political ploy that panders to the powerful anti-climate lobby. It seems unlikely that Ramokgopa has considered the negative economic effects of delaying the carbon tax, not least in relation to the introduction of the EU’s Carbon Border Adjustment Mechanism.

Meanwhile, big corporate electricity consumers continue to secure cushy secret deals with Eskom.

Open Secrets, an NGO focused on accountability for private sector economic crimes, recently reported on its attempts to access information about a new pricing deal negotiated between Eskom and South32 in 2021. South32 operates the Hillside aluminium smelter, reportedly the country’s largest industrial electricity user.

The pricing details should be easily and publicly available, given that the Supreme Court of Appeal (SCA) found in 2013 that information about preferential pricing agreements between Eskom and BHP Billiton (from which South32 was spun off) is in the public interest and should be disclosed. After the SCA judgment, Media24 revealed that Hillside was paying 22c per kilowatt-hour for its electricity, compared to the R1.40/kWh paid by domestic customers.

Touting a delay in the carbon tax as a deft solution to unsustainable tariff hikes is a performative political ploy that panders to the powerful anti-climate lobby

Astonishingly, despite the SCA’s ruling in 2013 on exactly the same issue, Eskom and South32 are again refusing to disclose the pricing terms agreed on in 2021.

Towards the end of last year the National Energy Regulator of South Africa also approved six-year “negotiated pricing agreements” (NPAs) for several smelting operations owned by the Glencore-Merafe joint venture and Samancor Chrome. Again, the tariff details are not publicly available.

To qualify for these NPAs, the operations have to demonstrate that they “would not be sustainable on the applicable standard tariff”. Of course, there are thousands — probably tens of thousands — of SMEs that are not sustainable on the applicable standard tariff, but because they don’t have direct access to the government the way powerful corporates do, they don’t get the opportunity to motivate why they should receive special treatment.

In its multiyear price determination application, Eskom estimates that its carbon tax liability from 2026 to 2030 will be R5.5bn, R21.2bn, R19.8bn, R19.2bn and R20.9bn.

It’s worth remembering that the carbon tax goes straight back into the national fiscus. The companies that are the beneficiaries of preferential pricing deals are offshoring significant proportions of their profits via dividend payments to foreign shareholders. Surely it is important for taxpayers to understand the extent to which our subsidies to these companies — because that is what preferential pricing deals are — are affecting tariffs for everyone else?

Has anyone in any government department done a thorough cost-benefit analysis of the effects on electricity tariffs of delaying the carbon tax for Eskom, against the effects on electricity tariffs of secret preferential pricing deals for multinationals?

Every detail of these NPAs should be publicly disclosed so that independent experts can assess their implications for poverty, inequality and economic competitiveness. Without this, it is only reasonable to conclude that the public is getting the raw end of the deal.

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