KEY POINTS
- Ramaphosa backs full transfer of Eskom’s transmission grid to an independent TSO.
- Eskom warns that a rushed transfer could expose more than R400bn in debt to financial risks.
- Critics want careful sequencing to protect jobs, consumers and South Africa’s electricity system.
South Africa’s plan to restructure Eskom and establish an independent transmission system operator (TSO) has intensified debate over the pace, financial risks and broader consequences of breaking up the country’s electricity utility.
President Cyril Ramaphosa on July 31 endorsed the phase one report of the Eskom restructuring task team, reaffirming his position that the new transmission system operator should not only manage South Africa’s electricity grid but also own the physical transmission infrastructure.
The move is central to the government’s broader electricity-market reforms, which seek to separate Eskom’s generation, transmission and distribution functions and create a more competitive power market.
However, Eskom’s board, led by chair Mteto Nyati, has urged caution over the timing of the transfer. While the board supports the long-term objective, it has stressed that ownership changes must occur only when Eskom’s financial and contractual obligations can be protected.
Nyati’s position highlights a major concern surrounding the restructuring: transferring valuable transmission assets before addressing Eskom’s debt and lender agreements could create significant financial instability.
According to the argument presented by Lwazi Ntombela, Eskom has more than R400 billion in debt and the transfer of assets could constitute a material event for its lenders. If the restructuring is not carefully managed, contractual provisions, including cross-default clauses, could potentially be triggered.
Such a development could place additional pressure on Eskom’s finances, undermine investor confidence and ultimately affect the wider economy.
For Eskom’s board, therefore, the issue is not whether reform should happen, but whether it should happen quickly enough to satisfy political and market expectations without exposing the utility to unnecessary financial risks.
Electricity law gives government five years
South Africa’s amended Electricity Regulation Act, which came into force in early 2025, already provides the legal framework for establishing an independent transmission and market operator.
The legislation gives government a five-year period to implement the new structure and establish a wholesale electricity market.
This means the legal direction of travel is largely settled. The central dispute is now about implementation.
Supporters of a faster transition argue that South Africa cannot afford further delays in opening its electricity market to competition and independent power producers. Critics, however, contend that the available five-year window should be used to carefully stage the process rather than compressing major asset transfers into an unnecessarily short period.
Opposition to a rapid break-up of Eskom is partly rooted in concerns about the benefits historically provided by its vertically integrated structure.
Under the existing model, Eskom has been able to coordinate generation, transmission and distribution as parts of one interconnected system. It has also used revenues from different parts of the business to support other areas, while coordinating network investment, electricity reserves and system stability.
Critics of the restructuring argue that separating ownership could make such coordination more difficult.
