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What was the REAL increase in cost of Electricity from 2008? How about 15.9% pa?

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A recent infographic produced by MyBroadband got us at MyPE wondering what the real increase in the cost of electricity has been over the 10 years in question covered by the infographic.

The assumption is that Eskom’s revenue stream is pretty well defined – their main product is electricity and the sale thereof. Product stocktaking must be a breeze, methinks!

DISCLAIMER: the figures below are based on the assumption that Eskom does not have any other extremely high profit margin product in their mix other than electricity.

Anyway in the infographic two numbers stand out to help us determine the actual global increase in electricity prices:

  1. Eskom’s Revenue in 2008 was R44.4 Billion vs R177.4 Billion in 2018
  2. Eskom’s selling price for electricity in 2008 was 19.45 cents per kWh increasing to 85.06 cents per kWh in 2018.

Taking those figures above:

  1. The annual increase in revenue equates to just a little over 14.95% per annum
  2. The electricity increase in price per kWh equates to 15.90% per annum

Looking futher at the figures:

  • Cost per employee increased from R302 670 to R605 700 – this represents an annual increase of 6.58%
  • The amount of electricity sold per employee dropped from 6.34 to 4.36 GWh/employee or by MINUS 3.7% per year
  • Employee benefit expenses increased from R11.4 Billion in 2008 to R29.5 Billion in 2018 – an annual increase of just under 10%

The sad story continues:

  • A R1 Billion profit in 2008 vs R2.3 Billion Loss in 2018
  • Installed Capacity slightly up from 43 037 MW in 2008 to 45 561 MW in 2018
  • Amount of electricity sold DOWN from 224 366 GWh in 2008 to 212 190 GWh in 2018
  • Major increase in staff numbers from 35 404 in 2008 to 48 628 in 2018

As any Accountant will tell you; “The Numbers don’t lie!”

How does Eskom fix this?

Like any business in distress they need to increase sales, decrease cost of sales. The first targets would appear to be employee numbers and costs. The next would be the cost of raw materials. As a state owned enterprise the employee numbers are a hot potato. With the recent buzzword, ‘state capture’, one assumes that the reducing of the cost of raw materials may also be a hot potato.

The burning question here is:

Given the double digit increases in revenue and product prices vs the single digit increases in employee costs, just where did the money go? Could it have been siphoned away through nefarious means?

Get more questions answered here: http://straton.co.za

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.
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