Eskom shoots itself in the foot

While Eskom has made meaningful progress in securing South Africa’s electricity supply, the utility is now moving backwards on the one reform that’s critical to the country’s long-term energy security – its unbundling.

This was shown in the second BLSA Reform Tracker Quarterly Review, released by Business Leadership South Africa (BLSA) on Thursday, 5 February.

This tracker monitors reform progress in South Africa, keeping track of 245 reform deliverables across criminal justice, governance and economic categories. 

Of these 245 deliverables, 34 have been completed, 19 have been halted, and 192 remain in progress. Since tracking began in March 2024, the overall reform score has risen by 23.7%.

However, BLSA warned that the latest quarter showed a concerning backslide in reforms in the electricity sector.

“The broad trajectory remains positive – South Africa’s reform agenda is delivering measurable results,” said BLSA CEO Busi Mavuso. “However, the reversal in electricity sector reforms is deeply concerning.” 

She explained that the backwards movement can be seen in Eskom’s unbundling, a reform considered critical to ensuring South Africa’s long-term electricity security.

Eskom’s unbundling into three separate divisions has been planned for decades, with the idea first introduced in a 1998 White Paper on Energy Policy, which detailed the steps South Africa should take to secure its electricity supply in the long term.

While the unbundling was initially pursued, progress was slow, and it eventually fell to the wayside as South Africa and Eskom’s priorities realigned.

Between 2007 and 2018, the challenges posed by load-shedding grew, becoming the utility’s top priority, leaving little room for longer-term planning and forcing Eskom to focus on the immediate crisis.

However, the topic of Eskom’s unbundling was brought up again in 2019, when President Cyril Ramaphosa revived the plan in his State of the Nation Address.

Unbundling refers to splitting Eskom up into three separate divisions – generation, transmission and distribution.

In doing so, Eskom would no longer be South Africa’s electricity monopoly, with sole control over all three elements of electricity supply.

This will encourage competition in the electricity sector, opening it up to private players with the aim of making the industry more efficient and fair.

However, now, Eskom seems to have backtracked on these goals, putting critical reforms in jeopardy.

Undoing unbundling

Eskom has made progress towards its unbundling. The first major milestone came in 2024, when the National Transmission Company South Africa (NTCSA) was officially established as a separate subsidiary.

At the end of 2025, another milestone was reached when Electricity Minister Kgosientsho Ramokgopa approved a revised unbundling strategy.

This revised strategy introduced a new entity to house Eskom’s renewable energy business and confirmed plans to establish a National Electricity Distribution Company.

However, the new strategy also outlines plans to keep transmission assets inside the newly established NTCSA, which would also keep them under Eskom Holdings.

Therefore, it would create a separate Transmission System Operator (TSO) without asset ownership.

Several concerns have been raised with this strategy, with BLSA saying it represents a step backwards from the independent transmission system operator model that Operation Vulindlela, Necom and the National Treasury have been working towards.

“This deviates significantly from the work to establish an independent TSO that supports a competitive electricity market,” BLSA said. 

“The new structure means the TSO will be unable to raise capital on its own balance sheet, likely prolonging grid constraints and deterring new renewables rollout.”

This has seen the electricity sector’s score in the BLSA Reform Tracker decline over the past two consecutive periods, dropping from 73.2 points at the end of May 2025 to 71.4 at the end of December 2025. 

“Slower momentum is natural as reforms mature and near completion,” Mavuso said. “What matters is that the trajectory remains upward.” 

“However, we cannot ignore the concerning reversals in electricity – this sector is too critical to South Africa’s economic future to allow backwards movement.”

Stalls and setbacks

The latest update on the Reform Tracker also identified two other reform setbacks in the electricity sector.

Firstly, it pointed to the Electricity Regulation Act (ERA), which came into effect in January 2025. This Act is the primary legislation governing Eskom’s unbundling.

While the legislation came into effect earlier this year, a significant portion – specifically, the reticulation (distribution) section – was left out due to opposition from municipalities.

Currently, municipalities are largely responsible for distributing electricity to customers in South Africa, with Eskom taking care of the transmission and generation sides.

However, if Eskom’s unbundling were to be completed as originally envisioned, municipalities’ reticulation and distribution role, and therefore the revenue they collect from these sources, would be far more limited.

Municipal challenges to this limitation and what their role under the new system would look like delayed the promulgation of the ERA.

Eventually, the government decided to exclude the section entirely to avoid further delays and a potential Constitutional Court challenge.

Secondly, the BLSA Reform Tracker update pointed to the new national wheeling framework as a challenge facing the electricity sector.

This framework was approved by South Africa’s energy sector regulator, Nersa, in 2025, aimed at standardising the fees private traders pay to use the national electricity grid to buy and sell electricity.

Nersa has also granted five trading license applications to this end, allowing these private players to wheel electricity on the national grid.

However, in a surprising move, Eskom, which had so far encouraged opening up the grid to private players, lodged a legal challenge against the framework and some of the trading licences.

The utility argued that the current pricing model introduced in the framework does not properly account for cross-subsidies.

In other words, Eskom argued that the framework’s current pricing model could leave the utility with only subsidised customers while private players serve wealthier clients, which would threaten its long-term financial health.

Energy expert and EE Business Intelligence’s managing director, Chris Yelland, previously described Eskom’s argument as disingenuous and opportunistic. 

He pointed out that Eskom has only opposed some of the trading licences, allegedly indicating that the utility is “cherry-picking” the competitors it fears the most.

Regardless of the intentions behind Eskom’s challenges, the effect is that it has limited licensed traders’ access to the grid and stalled critical reforms in South Africa’s electricity sector.