Exploring solutions to South Africa's costly electricity tariffs for businesses

Zawya

7 hours ago

While the US tariffs have been dominating the headlines since they came into effect, there's one other tariff plaguing South Africans: electricity. Just months after Eskom-direct consumers experienced an increase of 12.74%, municipal power users in South Africa were slammed with a rate hike of 11.32% last month. Following protests and public outcry over the hikes, Electricity Minister Dr Kgosientsho Ramokgopa acknowledged that the increases were expensive and would result in "energy poverty."
Although he has since called for a formal review of the rates, electricity costs are still projected to remain high, especially for corporate and industrial consumers, even though this may provide some relief, particularly for lower-income people.
While annual increases are nothing new, the impact on large commercial and industrial (C&I) users is mounting, and this year's price hikes come with a new sting in the tail: additional charges like the Eskom Generation Fee and Legacy Charge that will hit heavy users the hardest.
Brandon Horn, head of commercial at SolarAfrica, says for large energy consumers, this means one thing: rising operating costs and growing uncertainty about what the next few years might look like.
'However, the good news is that there are proven ways to rein in costs and gain clarity – not just for this year, but for the long haul.'
Electricity hikes and your business
For C&I companies consuming anywhere between 864,000 to 892,800 kWh per month (equivalent to a demand of 1,200–2,000 kW per hour), the new tariffs translate into significant monthly increases.
Municipal clients are bracing for an 11.32% bump, while Eskom Megaflex customers are seeing higher increases paired with two new charges: a Generation Fee, based on notified maximum demand (NMD) (now levied per kVA); and a Legacy Charge, applied in c/kWh, penalising high-energy usage patterns.
And while it's not yet clear how municipalities will incorporate these new charges, businesses can expect them to show up – either as line items or baked into broader tariff structures.
Uncertainty
These shifts come at a time when businesses are already struggling to plan effectively, says Horn.
'Despite Nersa's regulatory oversight, power price forecasting has become increasingly opaque, leaving companies unsure of what their electricity spend will look like next year, let alone in five years.'
The recent ministerial intervention highlights just how serious the affordability crisis has become, but it's unlikely to reverse the broader trend of rising electricity costs.
Add to this the knock-on effects of loadshedding, global inflation, rising compliance costs, an unstable macroeconomic environment and changing consumer behaviour, and it's easy to see why long-term planning is more challenging than ever.
In energy-intensive sectors such as manufacturing, mining and production, this can erode margins and reduce demand, especially when cost increases must be passed on to customers.
Energy stacking
Fortunately, there are several ways to offset these increases and take back control, says Horn.
'The current tariff hikes shouldn't be viewed in isolation. Instead, businesses need to look at their full energy profile and ask: Where is the pressure coming from? Is it peak demand? Grid reliance? Carbon compliance? Growth-related expansion?
"Once you know your pain points, you can layer the right solution.'
This is where energy stacking comes into play.
'It helps businesses absorb tariff changes while maintaining control and cost predictability. By combining different technologies, such as solar for self-generation and battery storage for reliability, for example, companies can reduce grid reliance and optimise energy use,' he adds.
To build a cost-effective energy stack, he suggests that businesses combine on-site solar PV to cut grid reliance and avoid charges like the Legacy Fee, with battery storage systems that optimise energy use during peak times.
Wheeling and energy trading
For those unable to install on-site generation, wheeling and energy trading offer flexible, affordable off-site solutions.
These can all be packaged through a power purchase agreement (PPA) or virtual power purchase agreement (VPPA), enabling up to 50% savings versus Eskom, with no upfront capex and clear tariff escalation for long-term predictability.
'With new tariff structures prioritising fixed over variable costs, you can't rely on a single solution anymore.
'A diversified model not only protects against tariff volatility, but also helps businesses comply with international environmental regulations and position themselves as sustainable suppliers – something demanded by many global trade partners.'
While the minister's review may provide some short-term relief, any adjustment may yet fall short of restoring affordability, with the global macroeconomic landscape remaining volatile.
'Businesses that act now – by reviewing their energy profiles and adopting layered solutions – will be better positioned to stay competitive,' says Horn.