Public Enterprises Minister Pravin Gordhan sent Eskom chairman Mpho Makwana a letter instructing the utility to transfer the company’s distribution assets to a new state-owned company, Distribute Company SOC Ltd.
Energy analyst Chris Yelland published this letter in a social media post, saying that Eskom is finally unbundling its distribution business.
Yelland told 702 that it had taken a full year to issue this instruction to Eskom as the new distribution company was already created on 26 August 2022.
The new company was registered by former Eskom CEO Andre de Ruyter, who is strangely still named as a director of the company alongside now-acting CEO Calib Cassim.
“The distribution industry is something of a mess at the moment, with Eskom distributing electricity in some parts of South Africa and more than 150 municipalities distributing electricity in their areas, many of which are failing to do so effectively,” Yelland said.
This also negatively impacts Eskom’s financial health as these municipalities are billions of rands in arrears when it comes to paying the utility for the electricity they sell to their constituents.
Therefore, Yelland said there needs to be a radical restructuring of the entire electricity supply industry, from generation to transmission to distribution.
“We have to do something about this because it is completely dysfunctional in many parts of the country.”
There are significant plans to enable municipalities to distribute electricity and major metropolitan areas and other new players as ‘traders’, whereby they buy electricity from Eskom’s generation company and distribute it to consumers.
This is part of the Eskom roadmap published in 2019 which outlined the unbundling of the utility into three separate businesses under the umbrella of Eskom Holdings.
Eskom is set to be split into a generation company responsible for producing electricity, a transmission company that will transmit electricity and a distribution company that will distribute electricity to consumers.
The transmission company will eventually become a fully independent state-owned company outside Eskom with a separate balance sheet.
This restructuring has been mooted for the past 20 years, with separate distribution and transmission companies on the cards since the late 1990s.
In 1998, the government published a white paper on the Energy Policy of the Republic of South Africa which outlined the creation of a separate distribution company.
However, unbundling Eskom has always been politically contested. This will likely continue, resulting in further delays in implementing this policy.
Yelland cautioned that South Africans should not expect quick progress as there are delays in the form of elections next year and the enabling legislation yet to be passed by Parliament.