Former Eskom CEO Reveals How Australia Can Cut South Africa's Electricity Costs

André de Ruyter, the former chief executive of South Africa's state power utility Eskom, has laid out a detailed case for why Australian energy policies could dramatically lower electricity costs for South African businesses and households. De Ruyter presented his analysis at an energy forum in Cape Town, arguing that South Africa has been slow to adopt market reforms that have driven down power prices in other countries.

The Australian Model That Works

De Ruyter pointed to Australia's restructured electricity market as a blueprint South Africa could follow. The Australian National Electricity Market, operating across multiple states, has introduced competition and flexibility that has benefited consumers. "Australia demonstrates that unbundling generation from transmission and distribution creates incentives for efficiency," de Ruyter told the audience. He noted that Australian wholesale prices have stabilised in ways that South Africa's monopolistic structure has failed to achieve.

South Africa's electricity sector remains dominated by Eskom, which generates about 95 percent of the country's power. The utility has accumulated massive debt, with borrowings exceeding 400 billion rand, and has struggled with ageing coal-fired plants that frequently break down. These costs get passed through to consumers, making South African electricity among the most expensive in the developing world.

Why South African Businesses Are Paying the Price

High electricity costs have become a significant drag on South Africa's industrial competitiveness. Manufacturing companies report that energy expenses now represent up to 30 percent of their operating costs, compared to much lower percentages in competitors in Vietnam, Bangladesh, and parts of West Africa. This has contributed to factory closures and layoffs in sectors that are energy-intensive.

The aluminium and ferroalloy industries, both major electricity consumers, have scaled back production. Several smelters have idled capacity in recent years, citing unsustainable power costs. Mining companies, which account for a substantial portion of Eskom's industrial customers, have warned that electricity prices threaten the viability of deep-level operations.

What Reforms Would Actually Look Like

De Ruyter outlined several specific changes that South Africa would need to implement. First, the country would need to break up Eskom's monopoly by allowing independent power producers to compete openly. Second, transmission infrastructure should be separated from generation and distribution to prevent cross-subsidisation. Third, the regulator would need authority to approve pricing structures based on efficient costs rather than legacy debt obligations.

The South African government has already taken tentative steps in this direction. The Energy Action Plan, launched in 2022, calls for increased private participation in generation. But de Ruyter argued that these measures do not go far enough. "What Australia achieved took a decade of consistent policy commitment," he said. "South Africa risks endless pilot programmes without genuine structural change."

Investment Community Watches Closely

International investors have flagged South Africa's electricity crisis as a key risk factor. Credit rating agencies have noted that Eskom's financial instability threatens government fiscal positions. Foreign direct investment into South African manufacturing has slowed, with companies citing unreliable and expensive power as a deterrent.

The Johannesburg Stock Exchange has seen mining and industrial stocks underperform compared to peers in other emerging markets. Analysts attribute part of this weakness to concerns about energy security. Any credible reform programme that promised lower, more stable electricity prices would likely shift investor sentiment.

Political Obstacles Stand in the Way

Despite the economic arguments, reform faces substantial political resistance. Unions representing Eskom workers oppose any restructuring that could lead to job losses. The ruling party's alliance partners have demanded that electricity remain a public service rather than a market commodity. Parliament has debated energy legislation for years without passing comprehensive reform.

The National Energy Regulator of South Africa has attempted to cap price increases, but utility costs continue to rise above inflation. Households in townships and rural areas, which receive heavily subsidised electricity, would face sharp increases if Eskom's cross-subsidy model were dismantled.

The Clock Is Ticking on South Africa's Power Sector

South Africa has committed to reducing coal dependency under its climate obligations, yet the transition requires massive investment that Eskom cannot finance alone. De Ruyter suggested that Australian-style private participation could unlock the capital needed to modernise the grid while keeping costs manageable. The government has announced plans to procure 14,700 megawatts of renewable energy by 2030, but private developers say they need clearer rules to commit capital.

What comes next will determine whether South African businesses ever see relief from electricity costs that have squeezed margins and chased away investment. Parliament is expected to debate amendments to the Electricity Regulation Act before the end of the financial year. Industry groups are pushing for provisions that would accelerate the licensing of independent generators. The outcome of those legislative discussions will signal whether South Africa is ready to borrow from Australia's playbook or will continue on its current path.