While the recently published draft Electricity Pricing Policy, which is due to be finalised by March 2027, will support a competitive electricity market, the launch of the South African Wholesale Electricity Market (SAWEM) has been repeatedly delayed, says business organisation Business Leadership South Africa (BLSA) CEO Busisiwe Mavuso.

In the most recent update provided, the market was set to begin trading with external participants in September, but no update has been provided on when full operation can be expected.

“I hope Electricity and Energy Minister Kgosientsho Ramokgopa will give us clear guidance soon. This will be an important step toward a competitive market, which may finally see prices coming under competitive pressure,” she says.

In what the Minister called Eskom 2.0, he set out as a clear objective for the State-owned entity’s board that Eskom must become an effective provider in a competitive electricity market.

Ramokgopa also set as an expectation that the board develop a roadmap for Eskom for the next ten years that adapts to the entry of new generators and traders, Mavuso reports.

South Africa's future competitive electricity landscape will include an unbundled independent transmission system operator (ITSO) and a key requirement of the Eskom board will be to work with the shareholder to ensure the successful separation of its transmission assets into the ITSO, she says.

The National Treasury, through the Development Bank of Southern Africa, has called for proposals from advisers to assist it with the unbundling process, as it will require extensive engagement with Eskom’s bondholders.

The separation of Eskom's transmission assets will affect the security bondholders rely on and it is likely they will need to provide their consent. The Eskom board must play a key and supportive role in this process, Mavuso says.

“South Africa has faced electricity tariff hikes for more than a decade and these are a big part of administered price inflation, with electricity prices having increased at almost twice general inflation in the past year.

“Ensuring the future electricity market is competitive will help to keep inflation in check.”

Further, bond yields are under pressure internationally and governments are being tested for the credibility of their monetary policies.

However, South Africa's institutional strength means that investors can see the country as a good place to invest in and lend to. Business strongly supports this fiscal credibility and the price stability that comes with it, Mavuso says.

“As we head toward the Medium-Term Budget Policy Statement next month, our fiscal authorities must reinforce their reputation for credibility. National Treasury has done well to regain credibility on our debt trajectory, and turning around the rapid deterioration we experienced in the Zuma years.

“Treasury must show that it has stayed on course, even with an election approaching. This would add to global recognition that South Africa is a good place to do business, and feed into the growth and employment agenda we are committed to,” Mavuso says.

“As BLSA, our focus is on following through with the full electricity reform process that was agreed to through the National Electricity Crisis Committee. As the Minister works toward implementing agreed upon policy for the sector, he can rely on our support to help ensure the success of Eskom 2.0 within a reformed electricity sector.”