South Africa’s New Administration Poised to Accelerate the Energy Transition

The African National Congress’ (ANC) historic loss of its parliamentary majority in the May 29th elections had some pundits predicting a setback for South Africa’s sustainable energy transition. But recent developments point to a more promising outcome, one that could hasten the country’s move away from reliance on fossil fuels. President Cyril Ramaphosa, now reelected for a second term, has named a cabinet that is poised to make good on campaign promises to continue with sweeping power sector reforms that hold considerable promise to advance the decarbonization of the power sector.

The new cabinet is drawn from across the coalition Government of National Unity (GNU) and includes figures who have been central to the improved reliability of electricity supply in 2024, after years of load-shedding. Notably, the cabinet picks and realignment of ministries signal a greater pragmatism essential to accelerating the pace of change. The separation of the power and energy portfolios from the Ministry of Energy and Mines of the previous administration will give the Minister of Electricity and Energy, Kgosientsho Ramokgopa, a freer hand to pursue reforms and speed the transition to renewable energy resources. Previously, as Minister of Mines and Energy, Gwede Mantashe had emphasized the need for the continued primacy of coal, and is perceived to have been overly cautious in addressing the problems at the national utility, Eskom, although he did recognize the importance of diversifying energy resources. Conversely, in the last year Ramokgopa, then sitting within the Presidency, led efforts to diagnose and address Eskom’s woes through a multi-stakeholder coordination mechanism, the National Energy Crisis Committee (NECOM). The results of NECOM’s efforts together with Eskom have been dramatic: whereas in 2023 there were in excess of 330 days with load-shedding, Eskom marked 100 days without loadshedding in the first half of 2024. A week into his tenure as Minister of Electricity and Energy, Ramokgopa emphasized his commitment to being ‘ultra-aggressive’ on renewable energy.

The need for national unity reflects a crisis mood that contributed to the ANC’s election losses. South Africa faces enormous political, economic, and social challenges, with questions of how to address climate change deeply intertwined with matters of economic, environmental, and energy policy. The pathbreaking Just Energy Transition Partnership , announced at the Glasgow climate summit in 2021, has garnered more than $12 billion in donor pledges for decarbonization investments in South Africa. Yet the sustainable energy transition has been subject to criticism in the intervening years. On the one hand, there are concerns about job losses, especially in communities dependent on the coal industry, and on the other, the perception that the promised investments are not happening. For example, despite concerted efforts to support communities dependent on the 1-GW Komati power station in coal-rich Mpumalanga province, the facility’s decommissioning in 2022 still resulted in hardship and uncertainty for many local residents, leading to the broader public skepticism that the energy transition would result in greater opportunity and prosperity in future.

During the election campaign, all the major party platforms included some language on the need for power sector reforms, although the specific proposals differed sharply. The parties did not emphasize climate policy, with most platforms including relatively generic language. This limited attention to climate notwithstanding, implementation of the power sector reforms that took shape during Ramaphosa’s previous administration can have significant near and long-term impacts. In early 2024, Parliament passed the Electricity Act Amendments (EAA) bill, which then received approval in the National Council of Provinces (NCP), South Africa’s upper house, just days before the May 29th elections. Ramaphosa is also expected to sign into law a Climate Change Bill that passed through Parliament and the NCP in 2023. Among other things, this legislation will give the Minister of Forestry, Fisheries, and Environment authority to influence policies across the government, and set sectoral emissions targets and carbon budgets.

The EAA includes provisions codifying the unbundling of Eskom, and the creation of a competitive energy market, which will be instrumental for South Africa to deliver on its international commitments to progressively decarbonize its power sector, which are reflected in the climate law. The first Ramaphosa administration announced the formation of National Transmission Company of South Africa (NTCSA) to serve as transmission system operator, as a wholly owned subsidiary of Eskom. After securing the necessary permits and licenses in 2023, NTCSA announced it had commenced operations as a separate entity on July 1. With this move, and the President’s anticipated signature of the EAA, South Africa is poised to accelerate investment in transmission, which will be critical to enabling renewable energy projects in the most resource-rich areas of the country. For example, the latest Eskom transmission expansion plan highlights a massive transmission build-out in the sun-drenched Northern Cape province. Given Eskom’s delicate financial situation and continuing moratorium on borrowing following a government bail-out, investment in new transmission capacity and generation will require private sector involvement. The reforms will move South Africa from a largely single-buyer power sector market model to one in which multiple power producers will compete and provide alternatives for generation, transmission, and distribution of electricity. The liberalization of the market, together with greater clarity regarding the powers of the National Energy Regulator of South Africa to set and approve tariffs and licenses for market players, will level the playing field pave the way for increases reliability of supply, more consumer choice, greater investment and innovation, and ultimately, lower costs.

At the same time, however, the EAA have not provided a clear roadmap for the role of municipal utilities. These companies have a constitutional mandate to manage most of the distribution-level network and account for roughly half of power sales, although they have only limited generation capacity of their own. While they are typically an important source of revenue for local governments many suffer from poor revenue collection practices, technical and commercial losses, and outdated technology. With the implementation of sectoral reforms to attract private sector investment, the municipalities can experiment with new approaches to meeting their customers’ demand for power, including by facilitating the trend toward distributed energy resources, while also becoming more efficient. Organizations like the South Africa Local Government Association have embraced the need to support better utility performance and innovation but lack the resources to help address the challenges facing local governments.

South Africa’s private sector is well positioned to respond to reforms that create a more favorable environment and mobilize the investment in generation and transmission projects. In a little more than a decade, private power producers have added 6.2 GW of renewable energy capacity through multiple rounds of the Renewable Energy Independent Power Producer Program. In addition, distributed energy resources, especially in the form of rooftop solar, have seen explosive growth in recent years as consumers and businesses have reacted to years of load-shedding and unreliable electricity service. The advocacy of sector groups such as the Energy Council of South Africa (ECSA), sectoral organizations for the solar PV, wind-power sectors, and independent power producers more generally, has helped quantify a potential of over 60 GW in solar and wind resources . ECSA has also articulated a vision for how private power can meet the pressing needs of residential, commercial, and industrial consumers while also driving the energy transition.

South Africa will need support to achieve the scale of investment and change to make the JET-P a reality. International development partners have been working extensively to support the government’s efforts to address Eskom’s power supply challenges, and to engage with municipal utilities to improve energy planning, support development of distributed resources, and implement energy efficiency programs. Very few municipal utilities have robust capabilities in these areas, although to be sure the strongest ones account for most of the municipal power sales in the country. Going forward, donors will need to capitalize on the momentum of recent months and the clear political opening created by the GNU to support the NTCSA in the development of models for private investment in transmission, and to support the municipal utilities to enable them to benefit from the increasingly liberalized and competitive market for electricity in the country.

This article was authored by Edward Hoyt , senior advisor for energy and climate.