Warning for South Africans wanting to dump Eskom

Eskom chairman Mteto Nyati said the utility is not afraid of competition, provided there is a level playing field, as South Africa will always need a base load, which Eskom will provide.

In addition, Eskom is now setting its sights on becoming more competitive in the renewables space, opening another avenue for dominance.

Nyati shared these comments in the latest instalment of PSG’s Think Big Series, where the chairman outlined Eskom’s views on South Africa’s increasingly competitive electricity market.

Over the past few years, South Africa has made significant strides in opening up the electricity market to more players, increasing competition in a market that was previously dominated by a monopoly, Eskom.

A more competitive electricity market has been envisioned for decades, with the seminal 1998 White Paper on South Africa’s Energy Policy articulating the notion of third-party electricity trading, open access to the grid, and competitive supply.

While it has taken decades to reach this point, South Africa has taken leaps forward in the past few years, particualrly with regards to Eskom’s unbundling.

So far, the utility has managed the full legal separation of its Transmission Division, with the new National Transmission Company of South Africa (NTCSA) operating independently of Eskom.

This marked a significant milestone in opening up South Africa’s electricity market, as the NTSCA will operate an open trading platform on which electricity generators, including but not limited to Eskom, will compete to supply users.

This will break Eskom’s stranglehold on South Africa’s electricity sector and open its Generation division up to private competition for the first time.

However, energy analyst Chris Yelland has pointed out that, for more than a decade, private electricity traders have operated in South Africa with Eskom’s acceptance.

PowerX, licensed by the National Energy Regulator of South Africa (NERSA) in 2009, and at least four others licensed since 2021, have been contracting with customers in Eskom and municipal supply areas.

However, trouble arose in 2024, when five new electricity trader licence applications were submitted. 

In contrast to its previous acceptance, Eskom lodged objections against all five trading licence applications during the NERSA hearings.

These objections have raised questions about the utility’s readiness for an open, free electricity market, despite efforts made in recent years to achieve exactly this.

“For years, Eskom accepted these realities. Now, as liberalisation gathers pace, Eskom objects selectively – revealing its hand through anti-competitive exclusionary conduct – a textbook abuse of dominance,” Yelland said.

Eskom’s not afraid of competion

Nyati told PSG that Eskom is not afraid of competition and that its recent objections were intended to ensure a level playing field, rather than anti-competive motivations.

“We are not against competition. We’re against an unfair trading environment where everybody else is being asked to trade at a much more favorable environment,” Nyati said.

He claimed that Eskom is being asked to play “with our hands tied behind our back”, creating an unequal playing field.

The chairman said this is because South Africa still lacks the policy certainty to create an equal playing field.

“In this environment where we are now, we are having traders being brought into an environment where policy has not been fully developed,” he said. 

“So, you are ending up with an uneven playing field where Eskom is being asked to do certain things whereas everybody else do not have those other obligations as well.” 

“We say that you need to level the playing fields. We are not afraid of competion. Level the

playing fields – let’s have three months of making sure that the rules are clear for everybody and we set the rules for competition and let’s go for it.”

This echoes the arguments Eskom previously made outlining its reasons for objecting NERSA’s decision to award electricity licences to five new players.

The utility argued that the necessary governing framework is not yet in place and said competitors will “cherry-pick” its most valuable customers and lure them away with cheaper tariffs.

It said these licences represent a radical and unconsulted policy shift from Nersa that would “upend the entire landscape of electricity provision”.

South Africa needs Eskom

Nyati added that Eskom is not afraid of competition, bcause South Africa will always need and depend on “base load” electricity, which will come from Eskom.

Base load refers to the minimum, continuous demand for electricity on a grid, which requires consistent, reliable power from sources like nuclear power plants, coal-fired plants, or hydroelectric dams that run 24/7.

Nyati described base load as the ability to generate electricity independent of the weather, and added that this would need to come from Eskom.

“Regardless of of the situation, you should be able to generate electricity. So, South Africa, if they want to count on an entity when it comes to the generation of energy, that entity has to be Eskom,” he said. 

“We need to provide that base load. That base load comes from your nuclear, it comes from hydro, it comes from your coal fleet. That’s it.”

He added that the utlity has also decided to compete in renewables, saying it is not only the private sector that can compete in that space.

“We need to be there as well. We’re targeting that space, we’re going to be there. So, you’ll find us across all of the energy mixes. That is the future of Eskom,” he said.