South African electricity revolution

South Africa is undergoing a two-part electricity revolution – a shift towards a mix of state and private electricity generation and decentralisation of electricity distribution due to the popularity of rooftop solar.

This is according to energy analyst Chris Yelland, who commented on South Africa’s changing landscape during a webinar hosted by Citadel Wealth Management. 

The first part of the revolution is the radical shift away from a state monopoly on electricity supply to a blend of state and private electricity generation. 

This is planned, with the state encouraging private enterprises and households to generate electricity and feed excess back into the grid. 

The second part is a consequence of the first: generation and distribution are becoming decentralised. 

This is primarily due to businesses and households’ rapid uptake of rooftop solar. Yelland emphasises that this is occurring with little government direction and assistance. 

This energy revolution has been driven by load-shedding, which has forced businesses and individuals alike to find alternative sources of electricity.

This echoes remarks made by political analyst JP Landman at a Nedbank Private Wealth webinar. 

South Africa’s power system is going to become decentralised within the next 5 to 10 years, Landman said, with multiple private electricity generators and distributors. 

This will have economic, social, and environmental benefits for South Africa.

The private sector will take over

For Eskom, “the train has left the station in terms of privatisation”, with generation set to be privatised, and distribution will follow – by choice or by default, said Landman. 

The privatisation of electricity infrastructure is estimated to result in R1.5 trillion investment in the next five years. This will boost economic growth in the long term. 

Ultimately, the private sector will take over government services. “It will change completely in the next ten years,” he said.

However, the government maintains that it will not privatise the utility. 

The Ministry of Finance explicitly said, “the government has no intention to privatise Eskom”, and the utility’s strategic assets will not be privatised.

However, deputy finance minister David Masondo said the Treasury does not support a state monopoly in the energy sector, and they will not rely solely on Eskom to generate energy.

Masondo’s comments were echoed by Gwede Mantashe, Minister of Mineral Resources and Energy at Absa’s Post-Budget Analysis. 

Mantashe said the government intends to “reform electricity supply from a monopolistic industry to a competitive one” per the 1998 White Paper of Energy Policy. 

The government aims to diversify electricity generation sources and “remains resolute in ensuring that such an electricity market structure comes to fruition”. 

However, Mantashe added that it would be a mistake to “totally remove the public sector” from electricity generation. 

He said the government must continue to “ensure the energy sector supplies reliable and efficient energy at competitive rates that are socially equitable”.