After more than a century of monopoly control under Eskom, South Africa is shifting towards a competitive multi-market electricity system anchored by a wholesale market and supported by bilateral trading.
The transition aims to unlock large-scale private investment, improve reliability and lower long-term costs, according to a new report by research and advisory firm Krutham, Policy to Power: Ten Actions to Deliver Green, Accessible and Secure Electricity. The report was commissioned by the South African Energy Traders Association (Saeta).
It sets out a practical, sequenced roadmap to complete the country’s electricity reforms and deliver a competitive multi-market that is designed to unlock the investment needed to deliver a least-cost, resilient power system, one that can support faster economic growth and lower tariffs.
The analysis draws together the key strands of reform under the Electricity Regulation Act, as amended, and the Energy Action Plan, translating policy commitments into concrete delivery priorities.
It focuses on the practical question facing the government and the market: Which binding constraints must be tackled, by whom and in what sequence, to turn reform momentum into durable outcomes?
At the centre of the reforms is the unbundling of Eskom Holdings, described in the report as the most important economic reform since 1994. “Done efficiently and timeously, it will enable competition, crowd in private capital and support a resilient power system,” the authors said.
Separating generation, transmission and distribution was intended to dismantle the single-buyer model that had dominated the sector for decades and lay the foundation for a competitive wholesale electricity market.
If implemented effectively, the reforms could deliver a least-cost, reliable electricity system while easing pressure on the public purse. Crucially, the report stressed that the reform challenge was no longer about policy intent: “It is now about execution, sequencing and institutional coordination.”
Global, domestic pressures
The push for reform was driven by both global and domestic forces. Internationally, electricity systems were being reshaped by rapidly falling renewable energy costs. In 2024, more than 90% of newly commissioned utility-scale renewable projects worldwide produced electricity cheaper than the most affordable new fossil-fuel alternatives, accelerating the shift toward decentralised generation, flexible grids and active markets.
South Africa’s domestic challenge was that much of its coal-fired generation fleet was ageing, unreliable and nearing the end of its technical life. More than half the current capacity would need to be replaced within the next 15 years.
Continuing to rely on the fleet raised costs, undermined reliability and constrained economic growth, the report said. At the same time, integrating large volumes of renewable energy required substantial investment in transmission infrastructure and grid flexibility.
“The combined result is a requirement for unprecedented levels of capital investment in both generation and transmission,” it noted. “This scale of the required investment cannot be met by Eskom, the public sector or the fiscus alone.”
Electricity reform was therefore “not optional”, but the primary mechanism through which South Africa could replace ageing capacity, modernise the grid and mobilise the investment needed to support growth, affordability and security of supply.
Crisis response, market reform
The reform agenda built on President Cyril Ramaphosa’s Energy Action Plan (EAP) of July 2022, which linked urgent load-shedding relief to deeper structural change after years of stalled reform.
“At the core of the EAP was a reimagining of how investment, risk sharing and pricing signals are dealt with, not through regulatory determinations but through a marketplace that can match demand and supply,” the report said.
Electricity traders were identified as a key part of the new system, connecting generators, customers, financiers and networks, helping projects reach financial close and enabling power to flow through bilateral contracts and wheeling arrangements.
The reforms aligned with commitments in government development plans, national budgets and successive State of the Nation addresses. In his most recent address, Ramaphosa confirmed plans to establish a fully independent transmission entity, with all transmission assets transferred out of Eskom. A task team under the National Energy Crisis Committee was expected to deliver a plan, budget and timeline within two years.
Making the multi-market work
The amended Electricity Regulation Act provided the legislative basis for the South African Wholesale Electricity Market. But the report was clear that legislation alone would not determine success.
“The impact of reform will be measured not by legislation but by whether a functioning multi-market emerges,” it said — one that expanded access, improved affordability, ensured security of supply and attracted private capital at scale.
The proposed system should integrate the wholesale market with bilateral contracts, public supply and municipal participation. The segments served different needs and must operate coherently, under aligned market and trading rules that were neutral and non-discriminatory.
Execution was the central risk. Correct sequencing of reforms, clarity on institutional responsibilities and careful management of conflicts of interest were essential as Eskom continued to operate alongside new market entrants.
“This is also where confidence can be lost if clarity falters,” the report warned, noting that unresolved questions around tariffs, market rules and institutional roles could deter investment.
Signs of momentum
Despite the risks, the report points to growing momentum. Between 2023 and 2025, nearly 4.7GW of privately contracted power projects above 5MW reached financial close, with traders playing a growing role. Many of the projects would otherwise have waited for government procurement, reducing pressure on public finances.
Eskom’s energy availability factor has recovered from crisis lows, unplanned outages have fallen sharply and load-shedding incidents have declined. Progress on wheeling and automation is expanding access beyond large industrial customers and reducing reliance on diesel generation.
To prevent momentum from stalling, the report sets out 10 priority actions, including publishing a Cabinet-endorsed electricity roadmap with clear milestones, finalising cost-reflective unbundled tariffs, strengthening the energy department and regulator, modernising transmission and distribution infrastructure, implementing the South African Wholesale Electricity Market alongside bilateral trading and enabling cross-border electricity trade.
“These 10 actions represent the minimum set of decisions required to lock in reform,” said Krutham managing director Peter Attard Montalto. “This is not about reinventing policy — it’s about making the hard decisions needed to implement what [the] government has already committed to.”
Saeta chairperson Khaya Mbatha highlighted the growing role of electricity traders who played a material role in the transition to a competitive electricity market that supported and boosted the economy.
Electricity traders were companies licensed by the National Energy Regulator of South Africa to buy and sell power, enabling private generation, wheeling and customer choice of supply.
“They connect generators, customers, financiers and networks, manage risk across time horizons and help projects reach financial close. Traders are already demonstrating early, real-world impact and as the South African Wholesale Electricity Market comes into operation, their role and impact will grow.”
A durable transition in the electricity sector depended on balancing the needs of Eskom Holdings and the private sector, the authors said.
“Eskom Holdings must address its legacy issues, complete unbundling and define its future role. The private sector needs certainty on policy, regulation and timelines to reach bankable and commercially viable projects.
“These needs are well understood and do not conflict if the state accepts that Eskom Generation’s relative fleet will shrink as private investment enters, in tandem with the anticipated coal decommissioning schedule. The task now is to manage that transition deliberately and fairly.”
That required clear decisions on Eskom Holdings’ end state, explicit timelines for implementation and strong safeguards to ensure the independence of key functions to avoid conflicts of interest and support a level playing field. “It also requires stronger regulatory capacity, a viable distribution sector and a path that aligns energy security with climate ambition, while safeguarding neutrality, non-discrimination and efficient market functioning.”
Electricity reforms, the report said, were a structural response to deep economic, energy and climate pressures that had built over decades. “The ultimate objective is faster, more inclusive and more competitive economic growth. Achieving that outcome requires three conditions: secure electricity supply, affordable and predictable prices and a credible pathway to decarbonisation.”
New report warns electricity reform hinges on execution, not policy
