The private sector has responded with high praise to President Cyril Ramaphosa’s clarification of the unbundling process at Eskom and where the entity’s transmission assets will rest.
After electricity minister Kgosientsho Ramokgopa announced in December that the Transmission System Operator (TSO) would not own the transmission assets once Eskom is unbundled, but that these would remain with Eskom, Ramaphosa announced that the restructuring of the power utility would now be managed by the national energy crisis committee.
Ramaphosa said the government would start the first round of independent transmission projects to enable private investment in expanding the national grid in 2026. The address takes South Africa another step closer to an electricity reform first conceptualised nearly three decades ago.
“Given the importance of this restructuring for the broader reform of the electricity sector, I have established a dedicated task team under the national energy crisis committee [Necom] to address various issues relating to the restructuring process, including clear time frames for its phased implementation.”
The committee will report to him in three months, he said and added that the unbundling of Eskom is a critical part of establishing a level playing field for competition in the energy sector, “so that we are never again exposed to the risk of relying on a single supplier to meet our energy needs”.
The president said regulatory changes allow the pipeline of investment in renewable energy to expand so that by 2030, more than 40% of SA’s energy supply will come from “cheap, clean, renewable energy sources”.
“We are restructuring Eskom and establishing a fully independent state-owned transmission entity. This entity will have ownership and control of transmission assets and be responsible for operating the electricity market.”
Business Unity SA (Busa) said in a statement that the clearer direction on Eskom restructuring, the need for independence and asset transfer to the new TSO outside of Eskom’s holding company, is likely to put the private sector at ease.
“Creditors, industry and business wanted something simple and clear, and we heard this in the president’s speech. We are looking forward to hearing more about the new task team but are pleased to see that National Treasury and the minister of finance will be part of it, and that it will report directly to the president himself.”
Business Leadership SA CEO Busisiwe Mavuso said Ramaphosa’s address asserts the government’s position on the Eskom unbundling and the role and independence of the TSO from Eskom Holdings and the work of the task team under Necom.
“This issue has caused major concern, with international investors and local business leaders starting to question the government’s commitment to the reform programme. Certainty is important, and we are encouraged by President Ramaphosa’s comments.”
Mark Evans, partner at Oliver Wyman, said the unbundling of Eskom is the right strategic move and, even though sections of the private sector has misgivings about its pace and the details, it will enable different elements of the network to operate more independently.
“As you sort of bring in the integration of renewables into the network, it will make it easier in the long term. It’s complex. The tariffs and the tariff models and the wheeling chargers and all those different things are going to change, but I believe it’s the right answer.”
Prof Raymond Parsons of the North-West University Business School said the outcome of the state of nation address depends on the commitment to expedite implementation, as well as what finance minister Enoch Godongwana’s budget, to be delivered later in February, says can be financed.
“The Eskom situation stresses why growth-friendly reforms must be seen as irreversible, if investor confidence is to be retained. It is also necessary to expedite the intended upgrading of public-private sector partnerships to enlarge the capacity for effective delivery.”
Even former Eskom Group CEO Andre De Ruyter praised Ramaphosa for “laying down the law” and providing clarity on the future of Eskom’s unbundling process in his address.
“It enables more private generation capacity brought onto the grid earlier, and it removes any possible suspicion that there could be a conflict of interest between the various parts of this competition, generation, transmission and distribution. And that was the intent of electricity reform all along, since the 1998 white paper.”
Ramokgopa’s December announcement, which was effectively overruled in the state of the nation address, was a key point of contention at this week’s Investing in African Mining Indaba in Cape Town.
Speaking at the Indaba on Monday, Minerals Council South Africa CEO Mzila Mthenjane said while Eskom did well to suspend load-shedding for the past year, the private sector remains concerned about potentially subverted expectations regarding the unbundling process.
Business Times
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