Grim impact of soaring electricity prices on South Africans revealed

The results of a new survey of the socioeconomic challenges facing South African consumers and how they are dealing with them paint a grim picture of a cold, dark winter ahead for most households due to soaring electricity prices.

The latest Debt Rescue survey found that a whopping 79% of South African consumers now rely on prepaid electricity, and they only load what they can afford, often leaving families in the dark before month-end.

It is even more disturbing that the survey results reveal that 86% of the respondents could already no longer afford the cost of electricity and started to cut back on essentials such as groceries or transport just to be able to afford to keep the power on, despite already doing everything they can to minimise costs even ahead of the April electricity tariff increase.

Neil Roets, CEO of Debt Rescue, says the timing could not be worse for struggling consumers, as the Nersa-approved 12.7% electricity tariff increase came into effect on 1 April 2025 for consumers who buy their electricity directly from Eskom, with a possible 0.5% VAT hike looming on 1 May. Other consumers will be hit with the increase on 1 July.

“This will make basic essentials even less affordable for the average consumer and could make the challenges of recent months feel mild by comparison,” Roets warns.

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New electricity prices from 1 April

Eskom’s restructured electricity tariffs, which took effect on 1 April, mean that their customers face a 12.74% average increase in electricity prices for the 2025/26 financial year, according to a study by EE Business Intelligence conducted for the Organisation Undoing Tax Abuse (Outa) on the impact of tariff increases on Eskom’s direct residential customers.

The new structure includes three main residential tariff options, namely Homelight, Homepower and Homeflex, each designed to suit different consumption patterns and needs.

However, Roets says despite all good intentions of making pricing more equitable, many low-income households will be hit hard by the higher energy costs. “This begs the question whether subsidies are the best path forward to protect low-income households.

“I wholeheartedly support subsidies to protect indigent households. With more than 80% of indigent households in South Africa not on the relevant municipal indigent registers, it is crucial that government ensures that this happens fast.“

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Fixed fee for electricity increased by 90%

Energy expert Patrick Narbel points out that most residential users are on the Homepower tariffs and that the latest hike will see residential consumers digging deeper into their pockets to afford electricity.

“This tariff has a fixed fee, which increased by almost 90% and has a variable fee that used to be split for the lower 600 units you consume in a month and above that at a higher price. However, this is not applicable anymore and that means if you use 600 units or less, your tariff will increase by approximately 20%.”

Roets believes Eskom and energy regulator Nersa are clearly out of touch with the reality of the average South African consumer and oblivious to the fact that more than half of the nation is struggling to put enough food on the table and will battle to keep their families warm during the fast-approaching cold winter months.

“Against this backdrop of financial distress, it is unconscionable that Nersa took a decision that places this basic utility out of reach of millions of people nationwide,” Roets says.

Another major factor is that the rand remains under severe pressure, caught in the crossfire of global and local instability. One major threat stems from the ongoing impact of international trade tensions, while the potential collapse of the government of national unity (GNU) adds to the uncertainty.

Together, these forces are weighing heavily on the currency, causing it to steadily lose ground, trading at R19,45 on Thursday afternoon.

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Consumer confidence already plummeted due to VAT increase

Consumer confidence also plummeted due to the threat of a VAT increase. According to the Bureau of Economic Research (BER), South African consumer confidence plunged to its lowest level since 2023, putting the country’s economic recovery at risk.

Momentum Investments chief economist Sanisha Packirisamy explains that this shocking outcome is a result of the government’s proposed two percentage point hike for VAT in the initial budget speech.

Amid the ongoing debate within the GNU, National Treasury went ahead and introduced the Rates and Monetary Amounts and Amendment of Revenue Laws Bill last Friday by notice in the Government Gazette.

The draft bill, as published on 12 March, provides for the highly disputed VAT increase, that will hike the rate from 15% to 15.5% on 1 May this year and from 15.5% to 16% on 1 April 2026.

ALSO READ: Economic ramifications of VAT increase: higher inflation, lower GDP

Effect of VAT hike should be top of mind for SA’s leaders

“The impact of a VAT hike on South African consumers should be the top concern among the country’s leaders right now. At this point it will be the straw that breaks the camel’s back. There has been a relentless onslaught on the pockets of hard-working consumers, with food prices escalating and not re-adjusting, consistently high interest rates since 2021 and electricity and water prices fast moving out of reach of ordinary citizens.”

Roets points out that the reality of the proposed VAT increase is that it will inevitably result in a rise in living costs across the board. 

“As the cost-of-living increases, ordinary citizens will have less disposable income. If spending is not decreased and considering the expected increase in the cost of goods, based on the projected consumer price inflation of around 4.5%, this is simply not possible for millions of consumers and will inevitably lead to increased debt.”