Eskom overhaul: Traders demand a clear 'end state' to unlock South Africa's power market

Electricity traders are pressing the government to set out, in binding terms, what Eskom will become after reform so private entrants can commit capital. Their analysis frames a detailed, legally enforceable "end state" for Eskom—covering ownership, commercial roles and legacy liabilities—as the lynchpin for opening the sector to competition and investment.

The traders' report, produced for the South Africa Electricity Traders Association (SAETA), links market entry and lower financing costs to legal and operational certainty. It warns that remaining ambiguity over unbundling, transmission stewardship and who carries legacy debt pushes lenders to demand higher risk premia, which can stall power purchase agreements and delay renewable deployments.

In a related development, the president told parliament that transmission functions will be housed in a new state-owned company separate from the legacy utility. Traders view that commitment as a constructive narrowing of institutional uncertainty because it clarifies who will run the high-voltage network and oversee wholesale market mechanics. But they stress that a political announcement does not substitute for a detailed, legally enforceable framework covering asset transfers, tariff-setting and regulatory oversight.

Market participants want explicit answers on whether Eskom will continue as a market participant, how a transmission company will be governed, and how responsibilities will be split between regulated and commercial entities. They emphasise the need for clear rules on PPAs, grid access and short-term trading to build liquidity and allow accurate pricing. Regulators such as NERSA and the DMRE must codify transitional arrangements to limit legal exposure for private investors and ensure continuity of operations during the handover.

Traders caution that practical implementation will test public-sector capacity: asset valuation, legal transfers, employee transition, tariff reallocation and interim operational continuity are complex tasks that require careful sequencing. Funding the new transmission vehicle and arranging short-term support to avoid service disruption will likely demand bespoke financial engineering and clear ring-fencing of assets and liabilities to protect creditors and taxpayers.

Absent a credible and enforceable roadmap, lenders will continue to apply higher margins, slowing new capacity delivery and keeping tariffs volatile. The report argues that partial reforms without a final, statutory structure create stranded-asset risks and governance gaps that deter portfolio financiers and sovereign-backed lenders. Clear debt-allocation mechanics are particularly important for banks and institutional investors underwriting multi-project portfolios.

The traders propose a phased approach with binding milestones, governance safeguards and a timetable for commercial separation, along with standardized contracting templates to accelerate project finance. They also call for transparent procurement processes, dispute-resolution mechanisms and explicit provisions for system reliability and balancing support during transition.

If the government's announcement on transmission is followed by detailed legal instruments and disciplined handover plans, these prescriptions could shorten time to market for independent generators and strengthen price discovery. Conversely, poor sequencing or incomplete legal protections could destabilise Eskom's balance sheet in the near term and perpetuate investor hesitancy, prolonging supply shortfalls.

For policymakers the trade-off is between speed and legal certainty: the traders argue sequencing must prioritise contractual and financial certainty to mobilise capital without compromising system stability. International developers and banks will be watching whether regulatory independence, ring-fencing of assets and a defensible timeline for handover meet market norms. Ultimately, the success of reform will depend less on the announcement itself than on the quality of implementation that follows.