The story of Eskom, South Africa's government electricity utility company by Muhammad Muntasir Adamu

Energy is changing. Across the globe, emerging technologies, changing customer sensibilities and the effects of climate change are reshaping how electricity is generated, supplied and consumed.

The need to reform the energy sector has been proposed in the past. In the 1998 White Paper on Energy Policy, Government had identified some of the reforms required to the electricity supply system, including the restructuring of Eskom, to ensure a reliable, competitive and transparent system.

Eskom was created in the 1920s to develop the mineral industrial complex that was taking shape following the discovery of abundant minerals in the late 19th century. Eskom’s vertically integrated structure was appropriate at its inception and served the country well for over 90 years.

This configuration is no longer suitable to meet the country’s energy needs and has made the business susceptible to the kind of problems it has recently experienced, including state capture. The restructuring of Eskom into three subsidiary businesses – generation, transmission and distribution – is necessary to reduce the risk that Eskom poses to the country through its dependence on fiscal allocations and inability to supply the economy with adequate power.

Reducing the debt burden of struggling power utility Eskom is one of the biggest headaches facing the state. Debt has swelled to R450bn, dwarfing what is owned by other SOEs. The state has had to provide two lifelines this year: a R69bn bailout announced in February 2019, and a separate R59bn lifeline spread out over two years included in a bill making its way through Parliament.

Eskom is aiming to have completed the unbundling of its generation, transmission and distribution operations by December 2022, according to a new policy roadmap published by Minister of Public Enterprises Pravin Gordhan.

Notes from the “Roadmap for Eskom” policy paper: 

• Eskom will not be privatized, each entity will still be part of Eskom
• Each power plant will initially have its own PPA with the Transmission Entity 
• There will be a transition to an open-market model for procurement of new energy
• The Transmission Entity is expected to be spun out by March 2020