Private sector will replace Eskom – Andre de Ruyter

Former Eskom CEO Andre de Ruyter said that while Eskom will always be a part of South Africa’s electricity sector, the private sector will largely take over electricity generation in the country.

De Ruyter was the keynote speaker at the PSG Financial Services Annual Conference, which started on 8 May 2024.

He said Eskom will always have a role to play in South Africa, but the utility’s role will, in the future, largely be limited to transmission.

He explained that the private sector is more capable and efficient at generating electricity in the country than Eskom and has more resources to do so.

If given the opportunity, he said the private sector will be able to supply electricity to South Africa more efficiently and cheaply than Eskom currently does.

De Ruyter said the government must avoid the temptation to sink increasing amounts of money into Eskom’s ageing, deteriorating coal-fired power stations.

Rather, those funds should be refocused on extending the utility’s transmission grid, which will allow the private sector to take over generation but for Eskom to still play a role in South Africa’s electricity market.

De Ruyter has previously spoken about how Eskom’s unbundling will seal the utility’s fate in this regard.

For years, the government has been working on 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.

Earlier this year, De Ruyter said South Africans should let go of their nostalgia for the “Eskom of old” as the utility will continue to shrink and transform into a transmission business.

He said the only logical outcome of Eskom’s reform and restructuring is that the company will be unbundled into three divisions – generation, transmission and distribution.

He said the utility will continue to generate electricity for a considerable time. However, it will inevitably become smaller as coal power stations reach the end of their lifespan and are decommissioned. 

“Mechanical equipment has a limited lifespan, and the new generation capacity will increasingly be provided by the private sector – that is a well-established fact,” he said.

De Ruyter said Eskom’s transmission business would handle the high-voltage supply between power generation and consumption points – a role that Eskom will still largely play going forward.

He recommended that the cheap financing the country gets from the EU and the US should primarily be used for expanding South Africa’s transmission network because it is a natural monopoly and should mostly be owned by the state.

On the other hand, the role of distribution will increasingly be fulfilled by local authorities like municipalities.