South Africa has lived through the upheaval of a state monopoly confronted by radical technological change. Telecommunications went first. Electricity is following, more slowly, more painfully and with far higher economic stakes.
The contrast between Telkom’s response to disruption and Eskom’s reaction to it offers a powerful lesson: monopolies that cling to the old order are eventually overwhelmed, while those that accept change, however reluctantly, can survive, reinvent themselves and achieve sustainable new growth paths.
Revolutionary innovations overturn existing social and economic systems. They destroy the economic foundations of established industries while simultaneously creating the conditions for new growth. Firms that defend legacy technologies and business models are swept aside. Those that accept that a new world has opened up abandon what once passed for sound business practice and radically change course and can flourish.
Telkom and Eskom, two seemingly rock-solid public utilities in the past, have both faced this moment. Their divergent trajectories tell a cautionary tale.
Telkom’s disruption came with the rise of cellular mobile telecommunications, which rendered copper-based, fixed-line networks increasingly obsolete, and the emergence of cellphone companies radically changed the sector’s competitive market structure.
Eskom’s disruption is being driven by the rapid spread of distributed renewable energy (wind and solar) and battery storage, creating new competitors in the form of independent power producers, which has steadily undermined the economic logic of centralised, coal-based electricity generation and vertically integrated monopoly control.
The difference is not the scale of the challenge but how it was met. For much of the 1990s and early 2000s, Telkom behaved as monopolies usually do. It resisted liberalisation, delayed structural reform and used its control of network infrastructure to frustrate competitors. It defended copper lines long after mobile technologies had begun to reshape global telecommunications.
However, Telkom did not ultimately survive by blocking change. It survived because it was forced — by technology, policy and markets — to confront a radically changed reality, embrace the new revolutionary innovation and pivot into a totally new business model.
Several decisive shifts followed. Though the state retained a significant shareholding, Telkom was corporatised and partially listed on the JSE, which fundamentally altered its governance model. Market discipline, disclosure requirements and investor scrutiny reduced political interference and imposed financial transparency. Telkom could no longer operate as an extension of ministerial discretion; it had to answer to balance sheets, shareholders and competition.
Crucially, management also abandoned the idea that legacy infrastructure was its core asset. Telkom pivoted away from copper-based fixed lines toward mobile connectivity, data services and fibre. It stopped defining its business as providing telephone calls and redefined it as enabling data-driven communication: streaming, social media, internet access and digital platforms.
Rather than viewing fibre as a threat, Telkom built Openserve into the country’s largest wholesale fibre provider, placing open access infrastructure at the heart of its business model. Against most expectations, Telkom emerged as a competitive operator in a crowded, fast-moving sector.
Eskom today occupies the position Telkom once did: a dominant incumbent protected for decades, facing an irreversible shift towards renewable energy and a restructured market defined by competition and decentralisation. However, Eskom’s response has been very different. Instead of repositioning itself, it has largely attempted to obstruct the transition.
For more than a decade Eskom has resisted meaningful restructuring and treated independent power producers and renewable energy as institutional threats rather than systemic necessities. It has opposed market reform, delayed grid access and consistently sought to retain ownership control over transmission assets, the very infrastructure that competitors require to reach customers.
At the same time, Eskom and its defenders have relied heavily on scaremongering. Structural reform, it is claimed, will spook creditors, trigger bond defaults and precipitate financial collapse. These arguments echo those once made in telecommunications. They were wrong then, and they are wrong now. The real threat to Eskom’s finances lies not in reform but in persisting with a business model that modern utilities are abandoning.
The deeper problem is that Eskom is attempting to defend a 20th-century utility model in a 21st-century electricity system. That model was built around large, centralised coal stations, one-way power flows, passive consumers and vertically integrated monopoly control. It is rapidly collapsing worldwide.
Electricity systems are being transformed by low-cost renewable energy, battery storage, flexible demand management, digital control, distributed generation and microgrids. Consumers are becoming producers. Large customers are sourcing power directly. Solar, wind and storage technologies are scaling faster and cheaper than Eskom can respond.
Government policy acknowledges what Eskom resists. Separating transmission is essential to unlock investment, enable open grid access and create competitive electricity markets. Yet the instinct to delay, dilute and retain influence remains strong. Cosmetic unbundling will achieve nothing if the same institution continues pulling the strings and obstructing new entrants.
Eskom can cling to outdated governance structures, defend legacy technologies and die a slow institutional death. Or it can accept the transition is inevitable and reinvent itself as a financially sustainable energy utility of the future.
The lessons from Telkom point clearly to what must be done. First, Eskom must accept competition is permanent. Independent renewable energy producers and distributed generation are not temporary intrusions; they are the new economic and technological reality of electricity supply.
Second, structural separation must be real. Transmission investment, ownership and operation must be fully independent. The separate transmission system operator must be able to raise low-cost finance off its balance sheet to strengthen and expand the grid to the benefit of all generators and customers. Eskom’s generation fleet should be unbundled into competing units, removing skewed market power and encouraging efficiency.
Third, Eskom must embrace and invest in renewable energy and storage innovations, supporting its own build-out of wind, solar and hybrid generation rather than lobbying against them.
Fourth, Eskom must invest seriously in flexibility and ancillary services. Batteries, grid stabilisation and system balancing are where future utility revenues lie. Increasingly, it will need to operate its coal fleet flexibly to complement the variability of solar and wind energy.
Fifth, increased digitisation would allow Eskom to optimise plant performance, reduce costs, manage distributed energy and customers intelligently, and participate competitively in the new South African wholesale electricity market through accurate bidding, risk management, dynamic pricing and portfolio optimisation.
Eskom’s monopoly era is ending. The question is whether it will enter the future as a competitive, modern power utility or as a failing relic clinging to control until crisis forces transformation. Telkom’s experience shows adaptation is painful but possible. Eskom must stop fighting the future and start building a place within it.
- The authors are emeritus professors at the University of Cape Town.
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