South Africa’s next electricity crisis is brewing

Minimal progress has been made in reforming South Africa’s electricity distribution sector, with many outages and equipment failures happening at this level of the country’s energy sector. 

This is feedback from energy analyst Chris Yelland, who told Classic Business that a crisis is brewing in the distribution sector, and it requires much more attention from the government and businesses. 

Yelland said that strong progress has been made in reforming the country’s electricity industry, but this has been predominantly focused on the transmission grid. 

Under the proposed structure of the new Eskom, which the reforms aim to create, a holding company called NewCo will operate with three subsidiaries that function independently –

• Generation: Eskom Holdings Generation (current Eskom)
• Transmission: National Transmission Company of South Africa (NTCSA)
• Distribution: National Electricity Distribution Company of South Africa (NEDCSA)

The most progress has been made in establishing the NTCSA as the legal separation of the transmission company into a subsidiary is complete, and it has the necessary licences to operate.

This will open up the country’s electricity grid to private sources of electricity generation, which will effectively compete with Eskom’s generating division. 

“This is a welcome step forward because things cannot continue as they are,” Yelland said.

Enabling the private sector to play its rightful role in electricity generation will transform the sector and help end load-shedding. 

However, very little progress has been made in reforming South Africa’s electricity distribution sector, which is largely made up of municipalities. 

Yelland said many outages and equipment failures occur at this level, with infrastructure such as local substations inadequately maintained or upgraded. 

Compounding this issue is the dire financial situation many of South Africa’s municipalities are in, with a large portion of them unable to pay Eskom for the electricity it provides. 

“This points to a completely dysfunctional electricity distribution sector. I do not see sufficient attention given to the reforms needed,” Yelland said. 

Reforms to this sector have been tried before, such as attempts to put the distribution of electricity into the hands of larger regional managers rather than municipalities. 

However, these attempts have failed, leaving the sector to continue to flounder and little progress made to implement key reforms. 

“This sector really needs more attention now, much more attention because that is where a big crisis is brewing,” Yelland said.