CAPE TOWN, Aug. 31 (XOL Africa) — South Africa is pressing ahead with a restructuring of its electricity market aimed at lowering power costs, attracting private investment and ending the country’s dependence on Eskom as the dominant provider of generation, the government said Monday.
The reform comes after years of severe power shortages and load shedding, which disrupted households and businesses and weakened investment. Government said efforts under its Energy Action Plan had helped restore a more reliable electricity supply, but warned that high electricity prices remained a significant constraint on households and companies.
“A reliable electricity supply is the backbone of our economy. It is essential for development and growth,” the government said in a message to South Africans.
It added that overcoming load shedding “was never the end of our work”, with affordability now becoming a central challenge.
The government has published a new Electricity Pricing Policy designed to make tariffs more transparent, prevent inefficiencies from being passed on to consumers and encourage competition in electricity generation. The National Energy Regulator of South Africa is also finalising regulations for a competitive wholesale electricity market.
The proposed market would allow multiple public and private generators to compete to supply power, with the government arguing that competition could improve efficiency, encourage investment and put downward pressure on prices.
South Africa also plans to establish an independent, state-owned Transmission System Operator to manage the national grid and electricity market. The operator would provide generators with equal access to transmission infrastructure and help coordinate investment in new grid capacity.
“The Transmission System Operator will manage the national electricity grid and electricity market independently and impartially,” the government said. “It will act as a referee amongst all producers.”
The government stressed that the restructuring would not amount to privatising Eskom. The utility will remain state-owned and is expected to participate in renewable energy alongside independent power producers.
“We do not need to choose between a strong Eskom and other competitors. We can have both,” the government said.
The restructuring is being overseen by an Eskom Restructuring Task Team comprising representatives from the presidency, National Treasury, the Department of Electricity and Energy, Eskom and the National Transmission Company South Africa.
The government said the reform would protect Eskom’s financial position as transmission assets are transferred and would take account of the interests of the utility’s lenders. It also pledged that workers would not bear the cost of the restructuring.
“Government is committed to ensuring that no jobs are lost as a direct result of establishing the Transmission System Operator,” it said, adding that organised labour would be consulted throughout the process.
The government’s case for reform is partly rooted in Eskom’s past financial and operational difficulties, including cost overruns at the Medupi and Kusile power stations, which contributed to the utility’s financial strain and ultimately higher costs for consumers and taxpayers.
The proposed market structure is also intended to unlock South Africa’s renewable-energy potential. The government said the country’s strong solar and wind resources could make it a competitive producer of clean electricity if supported by adequate transmission infrastructure, regulation and investment.
“Cheap and abundant electricity could become a source of competitive advantage for South Africa,” the government said, arguing that lower-cost power could support industrial expansion, new industries such as green hydrogen and electric vehicles, and job creation.
The government compared the proposed electricity reforms with the transformation of South Africa’s telecommunications sector, where the introduction of competition brought new investment, technologies and wider consumer access.
“Just as the transformation of telecommunications unleashed investment and expanded access to services, reform of the electricity sector can unlock billions of rands of investment in new generation and transmission infrastructure,” it said.
The government acknowledged that electricity differs from telecommunications because the national grid is a strategic public asset and electricity is an essential service. It nevertheless argued that competition among generators, combined with state ownership and regulation of transmission, could deliver a more efficient system.
“The purpose of the electricity reform is therefore not to privatise Eskom. It is to build a better electricity system,” the government said.
The reforms are intended to move South Africa from a system in which one utility carries most of the responsibility for generation towards a market in which multiple producers can invest and compete, while the state retains control of critical infrastructure.
The government said the ultimate test would be whether households receive more affordable electricity and businesses gain reliable power at competitive prices.
“Our objective is straightforward,” it said. “We want an electricity system that provides abundant, affordable and reliable power to every South African.”
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