Three signs Eskom is not yet out of the woods

Three signs suggest Eskom is still facing significant financial challenges despite delivering a profit in the year to March 2026. The utility declared a profit after tax of R30.3 billion, marking its second consecutive profitable year. However, Eskom remains burdened by massive debt and governance issues, casting doubt on its long-term stability.

Firstly, Eskom's financial position is weighed down by debt. As of March, its debt stock stood at an astonishing R356.2 billion, surpassing its revenue of R354.7 billion. This leaves little room for free cash flow, as nearly all excess funds are directed towards servicing debt and interest payments. For example, the company's R124.9 billion in free cash was largely consumed by a dominant R38 billion repayment of a domestic bond and larger sums earmarked for debt repayments and coal decommissioning efforts.

Secondly, Eskom is grappling with municipality debt. The utility is owed R119.9 billion by municipalities, a problem so severe that it is described by Eskom board chair Mteto Nyati as "the single greatest threat to Eskom's financial sustainability." Despite previous attempts at debt restructuring, Eskom's board chair bluntly stated that the utility cannot serve as a bank for municipalities.

The National Treasury has adopted a tougher stance, withholding funds that municipalities rely on for basic services until they settle their arrears.

Lastly, internal governance issues pose a third concern. External auditors have raised red flags about Eskom's ability to remain a going concern, citing reliance on government bailouts, declining electricity sales, and weak internal controls. The auditors flagged irregular expenditure amounting to R4.9 billion, the majority stemming from existing contracts rather than new incidents. This internal dysfunction further complicates Eskom's financial outlook.