Electricity reform advances on paper, but restructuring woes threaten OV progress

South Africa’s electricity reform programme is registering notable regulatory and market-structure milestones, but deep-rooted institutional and distribution challenges continue to slow the pace of real transformation in the sector, according to Operation Vulindlela's third quarter progress report.

While government points to approvals, new rules and fresh generation capacity as signs that the reform agenda is gaining traction, the report released on Friday makes it clear that some of the most difficult elements, particularly Eskom’s restructuring and the overhaul of the electricity distribution industry, remain stubbornly slow and complex.

On the regulatory front, the third quarter saw several building blocks for a competitive electricity market fall into place.

The National Energy Regulator approved a Market Operator licence for the National Transmission Company of South Africa (NTCSA), published draft Electricity Trading Rules, and approved new Grid Capacity Allocation Rules aimed at ensuring fair and transparent access to constrained network infrastructure.

An Electricity Market Advisory Forum has also been established to guide the transition to a wholesale market.

These steps are designed to underpin the shift from Eskom’s vertically integrated model toward a more open, competitive system.

"Important steps have been taken to strengthen competition and expand capacity, with additional renewable energy projects coming online and greater private sector participation being enabled," said deputy finance miniser, David Masondo.

"These reforms are helping to stabilise supply and reduce pressure on the economy." 

However, the report signals that the institutional transition remains delicate. A detailed implementation plan is still required to establish a fully functional Transmission System Operator and ensure the functional independence of the NTCSA during the transition, a critical step that is only due by March 2026.

Despite policy momentum, the pace of Eskom’s broader restructuring is described as slow. This includes progress in unbundling and, crucially, in reforming the electricity distribution industry (EDI), which is central to the financial health of the sector.

Government has acknowledged that movement here has not kept pace with other reforms, and the long-awaited EDI Reform Roadmap is only expected later in 2026.

Municipal arrear debt, weak revenue collection, and poor technical performance also undermine the sustainability of supply and the bankability of the broader market reform project.

To stabilise this layer, Cabinet has approved Distribution Agency Agreements (DAAs), with Eskom identifying 14 municipalities for initial implementation. These agreements aim to address arrear debt, ring-fence revenue collection and strengthen operational support.

Even as new renewable capacity is procured and projects reach commercial operation, including additional projects under the renewable energy procurement programme and a wind-and-battery project under the risk mitigation programme, grid capacity remains a binding constraint.

The approval of grid allocation rules is meant to improve transparency and efficiency, but the sheer scale of projects in the pipeline highlights pressure on the network.

According to the NTCSA’s public dashboard, more than 200 generation projects, representing over 23 900MW, are in the grid connection process, with several thousand megawatts already in execution.

The government has also finalised transmission infrastructure regulations and is moving to crowd in private investment through an Independent Transmission Projects programme, supported by the design of a Credit Guarantee Vehicle.

Meanwhile, freight logistics reform recorded one of the most significant breakthroughs of the quarter. A long-term concession agreement was signed for Durban Container Terminal Pier 2, unlocking more than R11 billion in private investment and modern technology.

Progress was also evident in water and sanitation reform, an area critical to both households and the broader economy. Preparations advanced for the establishment of the National Water Resources Infrastructure Agency, alongside institutional reforms to strengthen regulation and improve infrastructure delivery.

Visa and immigration reform is emerging as one of Operation Vulindlela’s early success stories. The rollout of digital visa systems, including the Electronic Travel Authorisation and the Trusted Tour Operator Scheme, has already delivered measurable results.

In local government, incentive-based programmes are encouraging metros to improve financial management and service delivery through ring-fenced trading services and stronger accountability. A comprehensive review of the local government system is underway, informed by extensive public engagement, alongside reforms to the municipal fiscal framework.

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