• South Africa will remove transmission control from Eskom and create a separate public grid operator
• Around 390 billion rands are needed over the next decade to upgrade the transmission network
• The reform aims to attract private investment and respond to IMF pressure

In a Feb.12 national address, President Cyril Ramaphosa confirmed that the government will complete the functional unbundling of state-owned power utility Eskom. A separate public entity will be created to operate the transmission grid and organize the electricity market.

A special task team, placed under the National Energy Crisis Committee, has three months to deliver a report with a detailed implementation timeline.

The reform is based on removing Eskom’s control over electricity transmission, which has become one of the main bottlenecks in national supply. The future public operator will manage grid infrastructure and guarantee non-discriminatory access for both public and private producers.

This decision departs from a proposal made in December 2025 by the Ministry of Electricity, which had suggested keeping transmission under an Eskom subsidiary. That plan had raised investor concerns about whether the government was prepared to fully end Eskom’s decades-long monopoly.

The objective is to dismantle a structure in which Eskom controlled generation, transmission, and part of distribution, while struggling with aging power plants and a weakened financial position. The selected model mirrors reforms in other emerging economies, where an independent grid operator ensures system neutrality and opens the market to competition.

A saturated grid, a major barrier to investment

South Africa’s energy crisis is structural. In recent years, repeated power cuts have weighed on industry, slowed investment, and constrained economic growth.

Although new generation projects, particularly in renewables, are under development, they face transmission capacity limits. The Department of Electricity and Energy estimates that around 390 billion rands (about $24.5 billion) will be needed over the next decade to modernize and expand transmission infrastructure. Eskom cannot finance this alone due to its financial constraints.

The government intends to leverage private sector participation. Private renewable energy investments have already exceeded 200 billion rands and added around 6,000 MW of capacity without increasing Eskom’s balance sheet exposure. Separating the grid is designed to create a more transparent and attractive framework for independent producers by removing uncertainty over access.

The reform also responds to explicit pressure from international financial institutions. In its latest Article IV report, the International Monetary Fund calls on South Africa to accelerate electricity sector restructuring by clearly separating generation from transmission, establishing a functioning wholesale market, and supporting private projects through risk-sharing mechanisms. The Fund also highlights Eskom’s limited capacity to service its debt amid rising public debt levels.

To support private transmission projects, financial instruments are being considered, including a credit guarantee mechanism backed by the International Finance Corporation. The aim is to reduce perceived investor risk and accelerate capital mobilization for infrastructure.

A politically and socially sensitive reform

Beyond technical considerations, the reform carries political sensitivity. Eskom remains a symbol of the state’s central role in the South African economy and a major employer. Any structural transformation raises social concerns and faces resistance, particularly from labor unions.

The government therefore seeks to preserve public ownership of the grid while opening generation to greater competition, balancing energy sovereignty with economic attractiveness.

At the macroeconomic level, improving power system reliability has become a prerequisite for renewed industrial investment. Persistent outages have undermined business confidence, and the reform is now viewed as a credibility test for the administration.

The three-month deadline for the task team marks an initial step. The success of the reform will depend on the government’s ability to turn this announcement into operational change by transferring assets, defining the governance of the new operator, and setting clear grid access rules.

In the short term, the priority is to mobilize financing for infrastructure upgrades. In the medium term, the key question will be whether the new structure accelerates grid connections and reduces power cuts. For investors and households alike, the goal is to end chronic energy shortages by restructuring the national power system and restoring generation performance.

Olivier de Souza