Just after midnight on May 16, Eskom celebrated a full year without load-shedding — a milestone last seen in 2018. In its media statement, the utility declared this a “decisive turning point” and a shift from a “recovering grid” to a stable, “high-performing power system” that had “successfully met 100% of the country’s electricity demand”. This, according to Eskom, was the result of a three‑year generation recovery plan.
But not everyone is celebrating. Leading energy experts, including former Eskom CEOs Phakamani Hadebe and André de Ruyter, as well as analysts such as Chris Yelland and Anton Eberhard, argue that the same forces behind this apparent recovery are also the classic early markers of a utility sliding into a death spiral.
It is argued that the electricity supply has stabilised not because Eskom has staged a genuine turnaround, but because the economy has steadily built a parallel electricity system. Rooftop solar, private generation, wheeled power (moving privately generated electricity through an existing grid) and municipal procurement now supply a growing share of national demand.
The concept of a utility death spiral first appeared in US energy economics literature in the early 2010s, though the underlying logic is decades older. It describes a self-reinforcing cycle in which declining electricity sales erode a utility’s revenue, prompting tariff increases to recover fixed costs, which in turn drive customers further away. Versions of this dynamic have played out in Germany, Australia and the US. The pattern is global: once customers can switch to alternative sources of electricity, the traditional model begins to unravel.
Eskom now fits this pattern almost perfectly. Its fixed-cost base is substantial, sales volumes have been falling for more than a decade and tariff increases have consistently — and significantly — outpaced inflation. The most profitable customers — mines, manufacturers, commercial property groups and affluent households — have left for more affordable and reliable private generation, leaving Eskom with a customer base dominated by low‑usage households, indigent individuals and financially distressed municipalities.
South Africa’s version of the spiral is sharpened by two uniquely local forces: the extent of demand destruction and the speed at which consumption is shifting away from Eskom’s grid.
First, the extent of local demand destruction has no parallel in peer economies. Like many countries, South Africa has become less energy-intensive as its economy gradually shifted from mining and manufacturing towards services. But the local decline in energy consumption per unit of GDP is far steeper than this structural transformation alone can explain, and is driven less by efficiency gains than by outright demand destruction. Years of load-shedding forced firms to redesign production or shut down energy‑heavy operations, and as the real cost of electricity soared, smelters and other large industrial users became uneconomic and either contracted or closed.
In Joburg, Ekurhuleni and parts of KwaZulu‑Natal, repeated substation failures, cable faults and overloaded transformers have forced municipalities to impose “load reduction” — outages triggered not by Eskom’s generation shortfall but by failing local infrastructure.
The Reserve Bank estimates the economy may be as much as 6%-10% smaller than it would have been without persistent power outages. Eskom’s falling sales volumes therefore reflect a weaker economy, not just improved energy efficiency.
Second, South Africa’s parallel energy system is unusual in both scale and origin. The country has built one of the largest behind‑the‑meter and private generation fleets in the world relative to the size of its grid. In most countries these systems merely supplement supply, but in South Africa they have become structural alternatives to it.
Elsewhere, parallel systems typically emerge from planned green transitions (Germany, Denmark and the Netherlands), market liberalisation (Australia, New Zealand and Chile) or state incentives (the US, China and Japan).
However, in South Africa they have arisen from state failure, survival behaviour and risk mitigation. Households and firms invested because Eskom could not guarantee supply, and wheeling expanded because corporates needed reliability. Private generation that supplements the grid elsewhere increasingly acts as a substitute for it here at home — a sign not of a smooth transition but of an energy system people are steadily working around. This helps explain why Eskom’s operational metrics can improve even as its relevance erodes.
Perhaps most importantly, Eskom’s death spiral is not only an operational and financial crisis but increasingly a fiscal one too. As sales fall and profitable customers leave, the utility becomes increasingly dependent on tariff hikes and government support. What Eskom can no longer fund, the state must.
At the same time, municipal arrears have climbed past R100bn, with many councils unable or unwilling to pay and Eskom lacking meaningful enforcement tools. Even as it celebrated the end of load-shedding, Eskom was warning that it could disconnect the City of Joburg unless more than R5bn in overdue payments was settled.
What begins as a utility death spiral becomes a municipal finance crisis and ultimately a public finance one. The National Treasury’s exposure to Eskom is now effectively permanent, and the fiscal space to absorb further losses is narrowing.
The fiscal exposure does not end there. South Africa is moving towards the same end-state seen in many global electricity markets. As old power stations fade and private generation grows, the grid becomes the centre of the system. In countries such as Germany this shift was planned and supported by policy, but in South Africa it is happening because Eskom’s death spiral dynamics are forcing a grid‑centred future by necessity rather than design.
The proposed new National Transmission Company (NTC) — the ring‑fenced entity that will own and operate the grid — would require R350bn–R400bn to build more than 14,000km of new transmission lines and dozens of substations to connect private generation and unlock new capacity. Eskom, which owns the NTC, cannot finance this and private capital will not build transmission infrastructure without state guarantees, leaving the Treasury to absorb the obligation on a balance sheet already under considerable stress.
At the same time, as affluent households and corporates defect to private generation, the remaining customer base becomes poorer and more financially fragile. As a result, the scope for cross-subsidisation declines and the state is increasingly drawn into funding lifeline tariffs and free basic electricity — costs that were once embedded in Eskom’s tariff structure but now migrate directly on to the fiscus.
Ratings agencies have long treated Eskom as a state‑backed credit risk, meaning any deterioration in its finances feeds directly into perceptions of South Africa’s own creditworthiness.
This comes at a particularly critical moment: after years of slippage, South Africa is finally beginning to regain sovereign credibility. Late last year S&P Global Ratings delivered the country’s first sovereign rating upgrade in more than 16 years, lifting the foreign currency rating to BB. This was followed by Moody’s shifting its outlook to positive and, more recently, Fitch moving both the long-term foreign and local currency ratings up one notch to BB — its first upgrade in nearly 21 years. All three cited tighter fiscal discipline, more coherent policy direction and early signs of structural reform beginning to take hold.
But Eskom’s death spiral threatens this progress. Ratings agencies warn that the utility’s financial troubles spill over into the government’s risk profile. Each intervention strains public finances and makes the country look riskier to lenders.
South Africa’s public finances are already stretched, and Eskom sits at the centre of that pressure. The utility’s heavy debt load, weak cash flow and reliance on bailouts, guarantees and emergency funding push up borrowing costs and squeeze out resources that could have gone to services, infrastructure or growth‑enhancing investment.
What began as an operational and financial crisis in the utility has now become a structural risk to public finances, even as load-shedding has abated. Stabilising Eskom and planning a credible path out of the death spiral are essential not only for the electricity system but for safeguarding the hard‑won gains in fiscal consolidation and sovereign credibility.
Yet despite a succession of plans, Eskom has offered no coherent vision of what it intends to be in the future or how it will get there. Energy specialists argue that the route out of the death spiral is narrow but not impossible. International precedents suggest Eskom will have to become a leaner generation company, competing with many other independent power producers and selling power through an independent NTC. South Africa’s ability to deliver this shift, rather than leave Eskom trapped in a death spiral, is the central question for the country’s energy and financial future.