South Africa’s biggest crisis – and biggest opportunity

Independent political analyst JP Landman said he is grateful for load-shedding in South Africa, as it has forced the country to make critical transitions that would otherwise not have happened.

Speaking at the Nedgroup Pre-elections Treasurers’ Roundtable on 24 April, Landman said, “Load-shedding is South Africa’s biggest crisis but also our biggest opportunity.”

This is because the country’s energy crisis has forced South Africa to make three important changes that otherwise would not have been made –

• Moving away from Eskom’s monopoly to a competitive market.
• Moving away from regulated electricity prices to a free market.
• Moving away from a high-carbon electricity system to a low-carbon system.

The first and second changes have been in the works for over two decades but have recently accelerated.

This will largely be done by unbundling Eskom into three distinct “companies” that will fall under one holding company.

Under the proposed structure of the new Eskom, 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 now at an advanced stage.

The NTCSA was incorporated in 2021, and the necessary licence applications to energy regulator Nersa have been made.

In March 2024, the National Assembly passed the Electricity Regulation Amendment (ERA) Bill to establish a state-owned Transmission System Operator (TSO).

This Bill could see the end of Eskom’s monopoly over power generation and transmission as the industry is opened up to private competitors.

This is because once signed into law, the Bill will create a level playing field in which all generators—not only Eskom—will have equal access to the grid. 

This includes independent power producers, municipal electricity generators, and “prosumers” – customers of electricity who also generate electricity.

In addition, South Africa is currently seeing the emergence of a diversified and competitive power generation sector.

This sector comprises Eskom and former Eskom generators, PPP generators, municipal generators, and hundreds of independent power producers (IPPs).

It further includes thousands of big, medium and small “prosumers” – customers of electricity that are both producers and consumers of electricity.

Instead of Eskom being the single buyer of electricity from its own generators and IPPs, there is an increasing trend of wheeling and trading of electricity.

The wheeling and trading happens between independent power producers, generators and traders to a multitude of customers across publicly owned electricity grids in Southern Africa.

More competition in South Africa’s electricity market will also mean more competitive prices, which will be set by the market, not necessarily the National Energy Regulator of South Africa (Nersa).

On the third change that load-shedding has sparked, Landman said many debates can be had about whether South Africa truly needs a low-carbon electricity system.

However, South African producers, particularly in the agricultural sector, will likely be prejudiced by restrictions like carbon taxes in the future if the country’s electricity supply remains high-carbon.

South Africa has already made significant strides towards a lower-carbon electricity system.

The country has a massive pipeline of big renewable energy and battery energy storage plants that are now coming to the grid, and this trend is accelerating, said energy analyst Chris Yelland.

“A fundamental change is taking place in South Africa’s electricity sector as it starts to catch up with those in many other parts of the world,” he said.