Economic analysis

Economic analysis

According to the Department of Economics of the University of Pretoria, the building of the two coal fire stations, Kusile and Medupi, would restore adequate reserve margins for the national grid, but does not remove the possibility of black outs [Bohlmann et al, 2015]. Industries, such as the mining industry has seen an increase of 346% in electricity service charge cost, from 7% in 2007 to 20% in 2014 of total operational expenses [EIUGoSA, 2014; Votteler, 2015]. The reliability of Eskom has also decreased, with self-generation being increasingly considered Electricity price escalations, past and future, will damage the global competitiveness of these companies [Creamer, 2012]. In addition, the South African government plans to launch a carbon tax in 2016, which will further add to the costs of current electricity sources.

Eskom’s capacity expansion program, started in 2005, aims to expand our generation and transmission capacity. This programme will increase our generating capacity by 17 384MW by 2022. To date, Eskom have delivered 7 031MW [Eskom, 2016a].


Bohlmann, J.A., Bohlmann, H.R., Inglesis-Lotz, R. (2015) An Economic-Wide Evaluation of New Power Generation in South Africa: The Case of Kusile and Medupi, Department of Economics of the University of Pretoria, 2015

Creamer, T. (2012) ‘Big users urge hard line on Eskom costs, as utility delays tariff submission’. Mining weekly.

Eskom (2016a) ‘Integrated report’, 31 March 2016

Energy Intensive User Group of Southern Africa (2014b), ‘Electricity cost as a percentage of annual expenditure’

Votteler, R. G. & Brent, A. C. (2015) ‘A literature review on the potential of renewable electricity sources for mining operations in South Africa’, Journal of Energy in Southern Africa