HomeIndustry SectorsFinance and PolicyHow has tariff structures affected low income South African households?

How has tariff structures affected low income South African households?

A recent Frost and Sullivan report evaluates the effect of electricity tariff increases on South African households, especially lower income households who are having to fork out more each month to keep their lights on. The country’s state utility, Eskom has justified price increases, claiming that South Africa has historically “had some of the lowest tariffs in the world” in comparison to other developing and first world countries.

Apart from this, Eskom’s tariff hikes are an effort to keep up with global best practises and ensuring that it is able to deliver a reliable service to its customers despite the rising cost supply, limited capacity and maintenance of generation facilities. Frost and Sullivan states that while South Africa has a near 100 per cent electrification rate and comparatively low tariff rates it “does not necessarily imply universal affordability of electricity for all South African”.

Despite the merits and effectiveness of initiatives introduced by government, Eskom and municipalities to alleviate the burden on poorer households through electrification grants, free basic Energy and cross subsidies, 75 per cent of households falling under LSM groups 1-5, continue to struggle to bring their energy costs down due to the low availability of affordable energy efficient technologies. Frost and Sullivan concludes that government and Eskom will need to ensure that lower income households are not negatively affected by rising costs and ensure that they are aware and have grasp of tariff reforms as they are rolled out.

To read the full report, please click here.

Information provided by Frost & Sullivan