South Africa will move ahead with plans to break up its beleaguered state-owned power utility Eskom and create a standalone company to operate the national electricity transmission grid, President Cyril Ramaphosa announced Thursday, a key step aimed at attracting private investment and modernising the country’s electricity system.
The reform comes after years of rolling blackouts that have hobbled Africa’s most industrialised economy. Eskom, which controls generation, transmission, and distribution, has struggled with ageing coal-fired plants, mounting debt, and operational inefficiencies, leaving businesses and households frequently without electricity.
In a nationally broadcast address, Ramaphosa confirmed the government’s intention to establish “a fully independent state-owned transmission entity” to own and manage grid infrastructure and oversee the electricity market. The president tasked a special committee under the National Energy Crisis Committee to manage the restructuring and report back within three months with detailed implementation plans and timelines.
“Breaking up Eskom is essential for investment and economic growth,” Ramaphosa said. “Separating transmission from generation will allow private-sector players to participate more effectively and help stabilise electricity supply across the country.”
The decision responds in part to growing concern from international investors and local business leaders over the pace of electricity sector reforms. Busisiwe Mavuso, chief executive of Business Leadership South Africa, said unbundling Eskom would “restore confidence and demonstrate government commitment to modernising the energy sector.”
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The move is expected to encourage competition and attract private capital, particularly in renewable energy. Over the past decade, private-sector investment in solar, wind, and other renewable projects has mobilised more than two hundred billion rand (approximately $12.5 billion), adding six thousand megawatts of capacity without placing additional strain on Eskom’s balance sheet.
Electricity Minister Kgosientsho Ramokgopa had previously proposed retaining transmission as an Eskom subsidiary, but analysts said a fully independent transmission entity would more effectively address bottlenecks that limit new electricity supply and hinder economic growth.
The International Monetary Fund (IMF) has urged South Africa to accelerate electricity reforms, including separating generation and transmission units, establishing a functioning wholesale electricity market, and supporting private transmission projects through risk-sharing mechanisms, such as a forthcoming credit-guarantee vehicle backed by the International Finance Corporation. The IMF also highlighted Eskom’s weak debt-servicing capacity and rising public debt, warning that delays in reform could have broader economic consequences.
Eskom’s financial strain is severe, with billions of dollars in debt and limited ability to fund the upgrades needed for reliable power. According to government presentations, the country will need approximately 390 billion rand over the next ten years to modernise transmission infrastructure – an investment Eskom cannot fund alone.
Experts say that unbundling Eskom could unlock long-delayed infrastructure projects, reduce transmission bottlenecks, and stabilise electricity supply, benefiting industry, commerce, and households. It is also seen as a critical measure for South Africa to meet its energy transition goals and maintain competitiveness in the regional and global economy.
Private-sector participation in renewables has already demonstrated the benefits of market-driven investment, and an independent transmission entity could allow faster integration of new power sources into the national grid. Analysts emphasise that clear regulation, effective governance, and international support will be crucial to ensure the success of the unbundling process.
As Africa’s most industrialised economy grapples with the dual challenge of growing electricity demand and limited public resources, the Eskom break-up is viewed as a pivotal step toward energy security, economic stability, and long-term sustainable growth.
Eskom, South Africa’s state-owned electricity utility, was established in 1923 and has long been responsible for electricity generation, transmission, and distribution across the country. As Africa’s largest power provider, it supplies around 95 percent of national electricity, serving both industrial and residential consumers.
Over the past decade, Eskom has faced persistent challenges, including ageing coal-fired power plants, operational inefficiencies, financial distress, and mounting debt exceeding 450 billion rand (around $28 billion). These issues have led to rolling blackouts, known locally as “load shedding,” which have disrupted industry, commerce, and daily life, undermining South Africa’s economic growth and investor confidence.
Government attempts at reform have been ongoing, with proposals to split Eskom into separate generation, transmission, and distribution entities aimed at increasing transparency, efficiency, and private-sector participation. Transmission bottlenecks have particularly constrained new electricity supply and slowed the integration of renewable energy projects, which have attracted over 200 billion rand in private investment in recent years.
The International Monetary Fund (IMF) and other international observers have repeatedly urged South Africa to accelerate electricity sector reforms. They highlight the necessity of unbundling Eskom, establishing a functional wholesale electricity market, and implementing risk-sharing mechanisms to encourage private investment, while addressing the utility’s weak debt-servicing capacity and the broader rise in public debt.
The proposed creation of an independent transmission entity seeks to modernise the grid, unlock private-sector participation, and provide reliable electricity to support South Africa’s industrial and economic development, ensuring that power constraints no longer hinder growth in Africa’s most industrialised economy.
