Major threat to the end of load-shedding in South Africa

South Africa expects to see around R72 billion in private investment in its electricity market by 2030, but current regulations and inconsistent implementation could put this investment at risk.

While President Cyril Ramaphosa has committed to supporting and accelerating private investment in the electricity sector, implementation at the municipal level is increasingly frustrating investors.

This poses a notable threat to electricity security in South Africa, as increased private-sector involvement is critical to ensuring sufficient long-term supply. 

As Eskom plans to retire some of its coal-fired power plants in the coming years, private sector generation – and clear rules guiding this transition – will become increasingly important.

In a recent press release, the South African Photovoltaic Industry Association (SAPVIA) welcomed some of the comments made in Ramaphosa’s latest State of the Nation Address (SONA).

In the 2026 SONA, the President highlighted reform in the electricity sector as one of the government’s top priorities.

“Regulatory changes have enabled a massive and growing pipeline of investment in renewable energy,” he said. “By 2030, more than 40% of our energy supply will come from cheap, clean and renewable energy sources.”

“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.”

One of the biggest reform priorities to enable greater private-sector participation and an even playing field is expanding South Africa’s electricity grid.

South Africa has ambitious plans to expand its grid by installing 14,000 kilometres of new power lines in the coming decade.

This will increase the national grid’s capacity and allow private sector players to compete alongside Eskom in a new, open electricity market.

Ramaphosa emphasised that this will mean South Africa is no longer dependent on a single electricity provider, which will also lower electricity prices for consumers. 

However, this grid expansion will also come at a high cost, estimated at around R440 billion, and the government will be heavily reliant on private-sector investment to fund it.

Frustrating private investment

While SAPVIA welcomed the President’s commitment to reforming South Africa’s electricity sector, it warned that local government inconsistency poses a major threat to private investment.

Currently, municipalities supply the vast majority of electricity to households, malls, office parks, factories, hospitals, and public infrastructure.

Electricity revenue also accounts for a large share of municipal income, making local governments across the country heavily reliant on its distribution role under the current market status quo.

In turn, municipalities are also dependent on Eskom, as they source virtually all of their electricity from the state-owned utility under bulk supply agreements.

This is part of the reason for South Africa’s high electricity prices and the current affordability crisis. 

As Eskom’s input costs have risen due to inefficiencies and mismanagement, so have the tariffs it charges municipalities for bulk power. Municipalities must then resell this electricity to end-users, often passing on the full increase, making electricity progressively unaffordable.

Therefore, ongoing reforms in the electricity sector, including Eskom’s unbundling, are also aimed at improving affordability, as adding more players to the market should force current players to price more competitively.

However, there have been some setbacks in this regard. Eskom’s unbundling into three separate divisions – generation, transmission, and distribution – is considered one of the most critical reforms for South Africa’s electricity sector.

The unbundling process is governed by the Electricity Regulation Act (ERA), which came into effect in January 2025.

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

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.

Therefore, municipalities have challenged parts of the ERA that would limit their role under the new system, which led to delays in the legislation’s promulgation.

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

This setback in reform progress and the uncertainty currently hanging over wheeling regulations pose a notable threat to private investment in the sector.

“While the President aims to fix local government, SAPVIA remains concerned that inconsistent municipal implementation of wheeling frameworks and small-scale embedded generation (SSEG) rules continues to frustrate private investment,” SAPVIA said.

“For the solar transition to succeed, the relationship between distributors and citizens must be based on clearly articulated guidelines and efficient systems rather than punitive measures.”

Regardless, the organisation said it is committed to ensuring that the R72 billion in private investment expected by 2030 translates into local value.