The One Item You Buy Daily Carrying a 250% Markup

After having a look at What it Costs Eskom to Produce and Deliver Electricity we had a look at what average markups are being applied to a number of other consumer goods – the results will further depress or delight you…

For comparison we used the Nelson Mandela Bay’s highest (current) Inclined Block Tariff charge of R4.57 per kWh.

The jump from Eskom’s R1.30 generation cost to a consumer price of R4.57 represents a 250% markup.

To answer the burning question: No, this is not in line with standard consumer product markups.

In the retail world, a 250% markup (or a 71% gross margin) is typically reserved for luxury goods, designer fashion, or software-as-a-service (SaaS).

For an “essential utility,” this gap is extraordinarily high, but it is unique because of the Distribution and Debt Burden specific to South Africa’s energy landscape.

Markup Comparison: Electricity vs. Consumer Goods

Why is the Electricity Markup so aggressive?

In a standard business (like a clothing store), the markup covers rent, staff, and profit. In the case of an NMB household, that R3.27 “gap” (R4.57 – R1.30) is consumed by three “Hidden Taxes”:

The Municipal Middleman (The “NMB Surcharge”)

Municipalities use electricity sales to cross-subsidize other services (like fixing potholes or clearing refuse). In Gqeberha, the municipality buys bulk from Eskom at a lower rate but adds a significant margin to fund the city’s general operations.

Retail Example: Imagine if your local Spar was forced by the government to charge R100 for a loaf of bread just so the local council could afford to fix the streetlights.

Technical & Non-Technical Losses (The “Leakage”)

Unlike a retail store that might lose 1–2% of stock to “shrinkage” (theft), South African electricity grids suffer from 15% to 30% losses due to illegal connections and aging infrastructure.

Retail Example: For every 10 pairs of jeans a store buys, they only manage to sell 7 because 3 are stolen. To break even, they have to hike the price of the remaining 7.

The Eskom Debt Tranche

A significant portion of the retail price isn’t paying for the coal or the wind; it’s paying the interest on the R400 billion+ debt Eskom incurred building Medupi and Kusile.

Retail Example: This is like a bakery charging extra for every croissant not because flour is expensive, but because they took out a massive loan 10 years ago to buy an oven that still isn’t working at 100%.

The “Measure to Manage” Perspective

The “250% Markup” highlights that the consumer isn’t just paying for power; they are paying for inefficiency.

A Bulletproof Argument:

“If you can’t control the 250% markup the city charges, you MUST control the number of units you use. Every kWh you save isn’t just saving R1.30 of power; it’s saving R4.57 of your hard-earned money.” The Shelly Wave Pro 1 will help you Measure and Manage your consumption.

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