South Africa will go ahead with breaking up state-owned power utility Eskom and creating a standalone company to manage the transmission grid, President Cyril Ramaphosa said on Thursday, a reform closely watched by international investors, Reuters reported.
Africa’s most industrialised economy has been plagued for years by rolling power outages as Eskom struggles with ageing plants and weak finances.
The split is intended to attract private investment and build a more modern, reliable electricity system. Power transmission is one of the biggest barriers to new electricity supply and broader economic growth.
In a national address, Ramaphosa confirmed plans for “a fully independent state-owned transmission entity” that will own and operate grid assets and the electricity market.
He assigned a task team under the National Energy Crisis Committee to oversee the restructuring and deliver a report within three months with clear implementation timelines.
Ramaphosa’s announcement follows an update from Electricity Minister Kgosientsho Ramokgopa in December, which proposed keeping transmission assets as an Eskom subsidiary.
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“This issue has caused major concern, with international investors and local business leaders starting to question the government’s commitment to the reform programme,” said Busisiwe Mavuso, CEO of Business Leadership South Africa.
Olga Constantatos, credit head at Futuregrowth Asset Management, said unbundling Eskom is intended to spur competition and private investment in power generation after decades of monopoly control.
Private-sector investment in renewables has already mobilised more than 200 billion rand ($12.5 billion) and added 6,000 megawatts of capacity without burdening Eskom’s balance sheet.
A presentation from the Department of Electricity and Energy noted that South Africa will need 390 billion rand over the next decade for transmission infrastructure, funding Eskom cannot provide alone due to its financial constraints.
The International Monetary Fund, in its Article IV report, urged South Africa to accelerate electricity reforms, including separating Eskom’s generation and transmission units, establishing a functional wholesale market, and supporting private transmission projects through risk-sharing tools such as a forthcoming credit-guarantee vehicle backed by the International Finance Corporation.
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