Category: MIL-OSI

Source: The Conversation – Africa – By Mark Swilling, Distinguished Professor of Sustainable Development, Stellenbosch University

The strategic significance of the reference to energy reform in South African President Cyril Ramaphosa’s State of the Nation Address cannot be overstated.

Many media reports carried a sense of elation about how this clears the way for resolving the country’s long-term energy crisis. This sentiment is premature: there are many devils in the details that need to be attended to before the country can celebrate.

Ramaphosa announced that the soon-to-be established Transmission System Operator will own South Africa’s transmission assets. This would include all main powerlines and sub-stations. This was contrary to what had been expected, particularly by South Africa’s state-owned power utility Eskom. Its assumption was that it would retain ownership of the transmission assets via its subsidiary, the National Transmission Company of South Africa, that was established in 2024.

Ramaphosa disagreed.

We are restructuring Eskom and establishing a fully independent state-owned transmission entity. This entity will have ownership and control of transmission assets and be responsible for operating the electricity market.

He went on to say:

Given the importance of this restructuring for the broader reform of the electricity sector, I have established a dedicated task team under the National Energy Crisis Committee to address various issues relating to the restructuring process, including clear timeframes for its phased implementation. It will report to me within three months.

The implications of this statement are far-reaching.

Surprise move

The National Transmission Company of South Africa, established in July 2024, is the current owner and operator of the national grid transmission system. It is entirely owned by Eskom Holdings. It was assumed that, within five years, it would be spun out of Eskom and reconstituted as the Transmission System Operator. In other words, in addition to owning the transmission assets, this entity would be the overall operator of the national grid, the manager of the build programme, and operator of the energy market provided for by the Energy Regulation Amendment Act.

In an opinion piece in December 2025 Dan Marokane, Eskom Group CEO elaborated on an announcement by the Minister of Energy and Electricty when he wrote:

Under the chosen modality, the (Eskom-owned) National Transmission Company of South Africa will remain the owner of transmission assets, entering a right-of-use agreement with the newly established Transmission System Operator … responsible for independently operating transmission assets, whether owned by the National Transmission Company of South Africa or private sector players under the envisioned Independent Transmission Projects programme.

This approach took some parts of government and major business and investment associations by surprise.

The objections by business stem from concerns about how the build-out of new energy capabilities will be financed. The US$25 billion plan on the table provides for a grid transmission build programme over the next 10 years to stabilise South Africa’s energy output.

But where will the money come from?

The money question

South African business and Enoch Godongwana, the Minister of Finance, argue that the only affordable and sustainable way to fund this kind of infrastructure build is to rope in the private sector. That there’s money available is not disputed. As a sustainable development scholar my own research for the National Planning Commission shows that there is a surplus of investment capital in South Africa to fund the just transition.

But there are concerns that investors will be reluctant to invest this capital in an Eskom subsidiary because Eskom’s balance sheet is compromised. And because of its track record and low ratings, Eskom is not regarded by some investors as trustworthy. And even if they do invest in Eskom, because of a perceived higher risk, this would raise the cost of capital and push up electricity prices.

Reportedly, Ramaphosa’s statement came after various consultations during December and January.

Why it matters

The widely supported government-approved Transmission Development Plan established by the National Transmission Company of South Africa makes provision for a R400 billion investment strategy over a 10-year period.

This will make it possible to build 14,400kms of new lines, 271 new transformers and rehabilitate the existing infrastructure.

Given the state’s fiscal constraints, massive increases in public funding to achieve the plan’s targets are unlikely. It follows that the bulk will have to come from domestic investors.

That means, if South Africa is truly committed to achieving the plan’s targets then it needs to make sure that the conditions are in place to unlock private capital for public infrastructures.

This is not privatisation. The aim is to mobilize South African capital to meet South Africa’s needs.

The danger of a return to loadshedding

If the conditions for increased private investment in this publicly-owned transmission infrastructure are not put in place, it is very likely that loadshedding will return in 2029.

Eskom’s Medium Term Adequacy Outlook makes clear the risks South Africa faces come 2029/30 when the three oldest power stations – Hendrina, Camden and Grootvlei – need to be decommissioned, and more after them.

The outlook also makes clear that if the much-needed 6GW of gas infrastructure does not come on-line in time to replace coal power, loadshedding is highly likely by 2029. But there is widespread doubt about this gas infrastructure materialising by 2029/30.

And so, if the National Transmission Company of South Africa cannot access the capital needed at the right price to massively expand the grid over the next five years, then the renewables (mainly wind) plus extensive backup that the country needs to prevent loadshedding by 2029/30 will not be able to connect into the national grid.

That will almost certainly result in the return of loadshedding.

Many analysts have raised doubts about whether Eskom has the headroom to raise the required debt against its own balance sheet. If they are correct, creating a “fully independent Transmission System Operator” that controls and owns its own assets is then presented as an easier way to raise debt at a lower price. In turn, this is supposed to have a beneficial impact on tariffs, and prevent loadshedding.

But this is a simplistic understanding of the solution.

The independent Transmission System Operator will take a few years to get established. The report the president wants will describe how the assets can be transferred over time without harming Eskom’s financial position. Sudden shifts should be avoided.

Furthermore, this report will have to deal with the details where the devils reside. In particular, if the Transmission System Operator is fully independent, then what matters is the full independence of the revenue system from Eskom, cost-reflective tariffs and revenue certainty (which includes a solution to the growing mountain of municipal arrears).

The call for a fully independent Transmission System Operator may give lenders the security they need, but the hidden threat is that the risk of revenue shortfalls gets transferred to the sovereign (and ultimately the tax payer).

In the meantime, the transmission build programme must be accelerated. Our research described how the energy transition can be accelerated. We also set out why a renewables-based economy enabled by the transmission build programme is not only the lowest-cost option compared to the alternatives, it is also central to “green growth” which the President described as “[t]he biggest opportunity of all… .”

To establish a fully independent state-owned Transmission System Operator within five years, alignment across three fronts will be required:

• government-wide support for the policy direction described by the President,

• managerial interests within the National Transmission Company of South Africa who see their futures beyond Eskom and act out accordingly over the medium- to long-term,and

• a South African investment community prepared to make big ticket long-term investments in a pipeline of large-scale transmission projects over the next decade.

But this can only work if a revenue model can be designed that is independent of Eskom, guarantees cash flow discipline and ensures cost-reflective tariffs. No document to date addresses this crucial nexus.

With policy and revenue certainty, South African investors will be able to make 20-year investments to implement the Transmission Development Plan. By ensuring that the country avoids loadshedding, these policy-enabled investments will drive accelerated green growth.

– Ramaphosa and a stable electricity system in South Africa: the devils are in the detail
– https://theconversation.com/ramaphosa-and-a-stable-electricity-system-in-south-africa-the-devils-are-in-the-detail-276014

Source: The Conversation – Africa – By Rod Crompton, Visiting Adjunct Professor, African Energy Leadership Centre, Wits Business School, University of the Witwatersrand

South African President Cyril Ramaphosa, in his 2026 State of the Nation address, announced that the country’s electricity transmission assets would move out of state-owned Eskom. This will happen once the newly established National Transmission Company of South Africa is unbundled into a fully independent company.

This is not the first time Ramaphosa has used his State of the Nation address to keep South Africa’s electricity reforms on track. In 2021, he raised the cap on private power generation from 1MW to 100MW. Minister Gwede Mantashe at the time admitted that the president had “twisted his arm”.

In 2022, Ramaphosa removed the cap altogether, unleashing a torrent of private investment.

Why did Ramaphosa need to intervene again in 2026?

Many would naturally expect a national electricity transmission company to have transmission assets. But for those who have followed South Africa’s long, zigzag road toward market reforms since it became government policy in the white paper on Energy Policy in 1998, it is less of a surprise.

I was involved in drafting the white paper and the 2019 Eskom roadmap. I worked in the Department of Minerals and Energy, was a regulator at the National Energy Regulator of South Africa for 11 years and subsequently sat on the Eskom board for six years until I resigned in 2024.

If nothing else, Eskom management has a dogged determination in pursuit of their objectives. In this fight, where ideology and serious money are intertwined, it’s difficult to predict the outcome. It’s important because it’s a prelude to bigger fights to come.

Reverse creates alarm

In December 2025, Ramaphosa’s Minister of Electricity and Energy, Kgosientsho Ramokgopa, announced that instead of being unbundled into a fully independent company, the National Transmission Company of South Africa would remain a wholly owned Eskom subsidiary, with its assets staying inside Eskom. Only the System Operator would move outside Eskom.

This announcement was alarming for several reasons:

• The South African Wholesale Electricity Market is meant to commence operations in April 2026. Eskom, as the dominant generator, would have a conflict of interest in a competitive market if it owned both generation and transmission assets.

• It appeared, politically, to reverse an important advance made by the Electricity Regulation Amendment Act, which came into effect in January 2025. The act created the expectation that the National Transmission Company of South Africa would become fully independent outside Eskom within five years.

• After severe electricity shortages between 2008 and 2024 (what Eskom terms “loadshedding”), analysts predict a return to power cuts around 2030 unless more renewable power stations are built in time. There is no shortage of willing investors, but the transmission grid is congested, especially in the western parts of the country where the wind and sunshine are best. The bulk of electricity demand is in the east, so the grid must be strengthened to transport power from west to east.

Ramaphosa predicted in his 2026 State of the Nation address that “by 2030, more than 40% of our energy supply will come from cheap, clean, renewable energy sources”.

Eskom plans to debottleneck the grid, targeting 14,500km of new transmission lines and 133,000 MVA (MegaVolt-Ampere) of additional transformers by 2034 at an estimated cost of US$27.5 billion.

An independent National Transmission Company of South Africa will need assets to borrow against if it is to contribute to grid expansion.

However, both Eskom and the state are effectively broke. The government cannot afford to continue the massive bailouts Eskom has needed to stay afloat over the last decade. Consequently, it must turn to the private sector.

It is planning public-private partnerships to enable private investors to expand the grid. But if Eskom’s transmission assets remain inside Eskom, those investors – as well as prospective investors in new generation capacity – would be less inclined to invest.

Both groups would fear that Eskom, as controller of the transmission assets, would discriminate against them in the emerging competitive market. Both want a level playing field and a fully independent grid to underpin the electricity market. Allowing Eskom to own the grid threatens investment and the market reform trajectory and also raises the spectre of future loadshedding.

Politically, Ramaphosa’s announcement is a public rebuke of his Minister of Electricity and Energy, who appears to have fallen under Eskom’s sway as it seeks to prolong its near-monopoly in the electricity market. Globally, monopolies do not relinquish market power easily.

In effect, Ramaphosa was settling a dispute between Eskom and the faction in his African National Congress that supports a developmental state dominated by state-owned companies, on one hand, and the National Treasury and those who recognise that depending on Eskom to solve the country’s electricity problems is unlikely to end well, on the other.

Ramaphosa went out of his way to say:

We are establishing a level playing field for competition, so that we are never again exposed to the risk of relying on a single supplier to meet our energy needs.

Why do Eskom and Ramokgopa want to keep the transmission assets inside Eskom?

The battle lines

They point to Eskom’s US$25 billion debt and note that lenders provided funds against the security of Eskom’s assets. If those assets shrink by removing the transmission lines, the lenders will object and demand repayment. Eskom would be unable to comply. Lenders with government guarantees would then turn to the government, which would also be unable to repay, leading to financial collapse.

This alarmist view ignores that utilities with debts in many countries have been restructured during market reforms. If they could negotiate solutions with lenders, why can’t Eskom?

Some believe Eskom is using debt as an excuse to retain market power, pointing to its legal challenge against the National Energy Regulator’s decision to grant electricity trading licences to five private traders.

Others believe Eskom is not receiving good financial advice and wonder why the National Treasury is not more forthright, given its extensive work in this area.

Eskom also cites its worry over:

• the US$6.27 billion owed by municipalities

• the need “to take account of the establishment of Eskom Green … proposed new subsidiary to house Eskom’s renewable energy business” and

• the requirement for lender consents on a loan-by-loan basis.

Energy Council of South Africa chief executive James Mackay describes the unbundling framework as a “hot potato,” noting that “timing, risk and ensuring Eskom Generation doesn’t collapse (are) equally important”.

Ramaphosa recognises that difficulties remain:

Given the importance of this restructuring for the broader reform of the electricity sector, I have established a dedicated task team under the National Energy Crisis Committee to address various issues relating to the restructuring process.

It must report to him in three months.

Ramaphosa’s comments in his address prompted Eskom’s probably shortest-ever press release, in which it pledged full support for the task team.

So, it’s not a done deal.

Notably, Eskom does not endorse the president’s announcement. It more likely sees the task team as another platform to advance its views in the ongoing contestation over the path and pace of South Africa’s electricity reforms.

It will be interesting.

– Does South Africa have a future without power cuts? Ramaphosa intervenes, but the drama isn’t over
– https://theconversation.com/does-south-africa-have-a-future-without-power-cuts-ramaphosa-intervenes-but-the-drama-isnt-over-276015