Navigating South Africa's energy transition: The risks of Eskom's dual role

The next electricity disaster

South Africa’s energy transition is unfolding in the midst of ageing coal stations, constrained grid infrastructure, and an urgent need for new investment. Without coherence and alignment, these pressures risk undermining growth and stability.

Last week, we examined the idea of a unifying focus for South Africa’s electricity sector and proposed the phrase: “investing in energy security to enable sustainable, low-carbon industrialisation and universal access to electricity.” We noted that the sector is currently paralysed by contested institutional battles.

This conflict is evident in several ways: Eskom’s attempt to claw back R94 billion in revenue following calculation errors by the energy regulator; its obstruction of the unbundling of the National Transmission Company of South Africa (NTCSA); and Eskom Distribution’s court challenge againstthe issuing of trading licences to independent traders.

Against this backdrop, Eskom has announced plans to market electricity from its own future renewable facilities and is negotiating long-term power purchase agreements with customers. The industry is asking how these Eskom-owned generators will be given grid access; potentially in a discriminatory rather than a transparent, non-discriminatory manner?

This dual role as both gatekeeper of grid access and competitor in generation creates mistrust. On grid access more broadly, the regulator has initiated work on rules that will determine how future generators and loads can access the grid fairly. In doing so, it has stepped into a process already underway through Eskom’s Interim Grid Capacity Allocation Rules (IGCAR). IGCAR has been criticised for increasing uncertainty and slowing access, rather than simplifying it.

The Department of Electricity and Energy has also published its Independent Transmission Provider Procurement Programme (ITP). The design of this programme raises concern: its qualification criteria appear to exclude South African companies from taking lead roles, relegating them to the positions of suppliers, contractors, or minority equity participants.

This raises questions about whether political influence is again being used in pursuit of financial leverage, with unintended, or perhaps intended consequences of reduced competition and the enrichment of politically connected players. The shadow of the Chancellor House precedent looms large.

The challenge, as the chair of Mulilo recently observed, is that while South Africa has the engineering expertise, the construction industry has been hollowed out after years of decline. “The construction industry has been decimated in recent years, so capacity needs to be rebuilt to keep up with the infrastructure rollout,” he said.

The question, then, is how to rebuild this industry. The first step is to establish a common goal such as “investing in grid expansion to enable energy security.”

The next is to provide certainty through a well-designed plan, under the leadership of the NTCSA, based on the Transmission Development Plan (TDP). This plan should clearly define the scope of work across three main areas: projects managed by NTCSA through its EPC panels; projects built, operated, and maintained under the concessionary Independent Transmission Provider model; and self-build projects developed by Independent Power Producers to connect their generators to the grid.

Such a plan could guide the construction industry to rebuild capacity by investing in equipment, training young engineers and technicians, upskilling managers and business owners, and developing entry-level workers into long-term professionals. Secondary impacts would include renewed investment in local manufacturing of transformers, switchgear, overhead lines, steel towers, and other key components.

Ultimately, rebuilding the industry is about execution, not endless planning. Delivery capacity must be restored.

The designers of the ITP should recognise that selecting empowerment partners for equity participation does not guarantee project execution. The real measure of success will be delivering transmission projects on time, within budget, and to the required quality.

Failure to deliver on the transmission construction plan would be South Africa’s next electricity disaster. That outcome must be avoided.

If, however, execution is secured, expanding and strengthening the grid would create new employment opportunities, deepen the technical skills base, and strengthen the industrial supply chain.

It would also enhance the country’s ability to transition successfully to a low-carbon future and achieve universal access to electricity.

Thomas Garner holds a Mechanical Engineering degree from the University of Pretoria and an MBA from the University of Stellenbosch Business School. Thomas is self-employed focusing on energy, energy related criticalminerals, water and communities. He is a Fellow of the South African Academy of Engineering and a Management Committee member of the South African Independent Power Producers Association.

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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