South Africa’s power sector reforms have taken a new turn and are back in the spotlight. The country’s electricity minister, in December 2025, approved the state-owned utility Eskom’s revised unbundling strategy. Under the structure, a new holding company will be established with four subsidiaries – National Electricity Distribution Company of South Africa (NEDCSA) to strengthen distribution networks; GenerationCo (GxCo) to hold legacy generation assets; Eskom Green – a new subsidiary to house Eskom’s renewable energy business; and the National Transmission Company of South Africa SOC Limited (NTCSA) – legally separated in July 2024, formerly Eskom Transmission.
Additionally, a new and independent transmission system operator (TSO) – TSO SOC Limited – will be established, fully independent of NTCSA and Eskom Holdings, providing non-discriminatory access to the transmission network, managing system operations and electricity trading (to support the development of a competitive wholesale electricity market), as well as acting as the central purchasing agency (CPA) under the National Energy Regulator of South Africa (NERSA). The minister stated that this is in line with the Electricity Regulation Amendment Act (ERAA), which came into force in 2025 and provides for the creation of an independent TSO within five years. Under the revised unbundling strategy, NTCSA will, however, continue to own, expand and maintain the national transmission grid and be responsible for rolling out its Transmission Development Plan (TDP), involving the addition of 14,000 km of high voltage lines and 133,000 MVA of transformer capacity by 2034, at an estimated cost exceeding ZAR400 billion.
The revised approach follows an extended debate over whether the NTCSA and its grid assets should be fully separated from Eskom, with considerations given to risk, pace of reform and creation of a sustainable utility. It was decided that keeping NTCSA within Eskom preserves the financial stability of the Eskom Group and avoids disruption to its highly leveraged balance sheet.
Another sticking point in the restructuring is the distribution sector, which is currently split between Eskom (the dominant player) and the 257 municipalities. NEDCSA (under Eskom Holdings) will be operationalised once key solvency metrics are met, which is largely dependent on finding a solution to municipal debt. About ZAR105 billion is owed to Eskom, of which ZAR62.2 billion is likely to be written off under new Distribution Agency Agreements (DDAs) as per a November 2025 update. A separate TraderCo will be established to participate in the future competitive market alongside other licensced traders. Eskom Green will accelerate Eskom’s participation in the renewables sector, aiming to add at least 2 GW by 2026.
As a CPA, the TSO will procure electricity from Eskom entities (GxCo and Eskom Green), independent power producers (IPPs), and other generators, and facilitate power purchase agreements. The TSO would also support ancillary services such as frequency control and voltage regulation to maintain system reliability.
Eskom has indicated that it will implement the new strategy in a phased manner through 2030, enabling the government and Eskom to manage financial, legal and operational risks, while building the capabilities required for a more open and competitive electricity market.
There has been a mixed reaction to the latest reforms. Critics argue that it marks a departure from the model approved by the ERAA. Competition in the electricity sector cannot thrive while the dominant generator controls the grid. Transmission cannot be expanded at the necessary scale by a financially distressed operator, and investment will stay limited unless Eskom’s core structural conflict is resolved. NTCSA was initially formed to perform transmission-related functions during the transition to creating an independent TSO within five years.
The South African Photovoltaic Industry Association (SAPVIA) has raised concerns about keeping transmission assets within Eskom, as it undermines independence and urgently needed investment in the grid. Without ownership of the underlying grid infrastructure, the asset-light TSO may not be able to raise finance at competitive rates nor provide non-discriminatory grid access, as the new TSO would remain dependent on an Eskom subsidiary for access. Further, critical transmission assets and grid expansion remain within Eskom, which lacks both the financial capability and the track record to maintain or deliver them. SAPVIA emphasised that grid access remains the most significant constraint facing South Africa’s electricity sector in 2026, despite strong investor appetite for renewable generation. Similar concerns have been echoed by other energy sector analysts, who warn that failure to fully separate the transmission grid could compromise future investment and increase the risk of supply shortages beyond 2030.
While the government’s Independent Transmission Project (ITP) initiative will attract private investment, the ongoing first phase involving 1,164 km of new lines across seven projects is only a fraction of what is required over the next decade.
On its part, Eskom Holdings welcomed the approval, stating that it enables the next stage of Eskom’s separation and supports the development of the future structure of South Africa’s electricity supply industry as defined by ERAA. The energy minister also recently clarified that the government is assessing the full financial and legal consequences of transferring Eskom’s transmission assets to NTCSA. Further, it was clarified that Eskom’s 2019 Roadmap explicitly envisaged a legally and functionally separate transmission entity that would remain wholly owned by Eskom, without transferring asset ownership outside the group. Through its latest unbundling strategy, the utility aims to improve efficiency, boost competition and investor confidence, and support reindustrialisation and economic growth, while retaining strong public oversight of the power system and its assets.
The industry is closely following the developments. In 2026, the South African Electricity Wholesale Market is scheduled to be launched in April, while a Credit Guarantee Vehicle (CGV), intended to support ITP project bankability in the absence of National Treasury guarantees, is scheduled for launch in July. The National Treasury has committed seed equity of ZAR2 billion in the CGV, which is structured as a private non-life insurance company regulated by the Prudential Authority.
While the reforms aim to provide a level playing field for competition, investor certainty to enable new investments, and ensure reliable and affordable supply to support long-term economic growth, only time will tell if these will be achieved as new developments unfold over the next few years.