In this article, Etana Energy CEO Evan Rice writes that South Africa’s Industrial Development Strategy (IDS) rightly identifies affordable, reliable and decarbonised electricity as essential to industrial growth, but delivering on that ambition will require coordinated electricity reform pursued with urgency.

South Africa’s newly released IDS sets out an important ambition: to place industrial growth, competitiveness and resilience back at the centre of the country’s economic agenda. At the heart of that ambition is a familiar but unavoidable requirement - affordable, reliable and increasingly decarbonised electricity.

That is why the IDS’s emphasis on energy as a core industrial enabler is so important. If South Africa is serious about growing energy-intensive sectors, attracting investment and supporting globally competitive industry, it needs an electricity system that can deliver on cost, security of supply and decarbonisation at the same time.

Encouragingly, one part of the reform agenda has already delivered tangible results. Since lifting the 1 MW cap on private power capacity that could be built without obtaining a generation licence in 2022, more than R150bn of private capital has been invested in 6.5 GW of new large-scale renewable energy capacity for private offtake via wheeling. Initially this took the form of bilateral transactions between IPPs and large power users. Since 2024, most new capacity (nearly 3.5 GW) has been facilitated by licensed electricity traders, who have expanded access clean power, competitive pricing and greater certainty over future energy costs to a broader range of companies. Traders aggregate both supply and demand, helping to manage settlement risk and allowing for more flexible contracting.

This development really matters for industrial and energy-intensive users, for whom electricity is a major input cost and an increasingly important factor in export competitiveness, including the need for decarbonisation. These transactions have shown that reform can unlock rapid private investment and real customer benefit without adding further strain to the public balance sheet.

However, wheeling is not a silver bullet. The gains already achieved through private market participation need to be reinforced by progress across the broader reform agenda if South Africa is to realise the IDS’s ambitions at scale.

Electricity sector reform needs to be pursued in a coordinated manner and with the urgency the moment demands. These reforms listed among the 10 key actions of the South African Energy Traders’ Association’s Policy to Power report include:

Finalising market rules for the launch of the South African Wholesale Electricity Market (SAWEM) later this year: The market rules will govern transactions in the SAWEM, ensuring the market functions fairly and competitively. The SAWEM’s success will be measured by whether it improves affordability, security of supply and investment outcomes. The deadline for comments on the market rules is 22 June and the National Energy Regulator of South Africa (Nersa) will host a public hearing on 1 July. Other key regulator matters to complete include the finalisation of the wholesale tariff methodology, as well as the vesting contracts framework that establish the pricing and contractual structures for Eskom Generation’s participation in the SAWEM – ensuring revenue recovery for Eskom while protecting the market against dominance by the incumbent. 

Finalising trading rules: These govern bilateral electricity transactions, which as referenced above have grown rapidly in recent years. It’s critical that the rules ensure that network operators recognise traders as buyers and sellers in their own right. The rigid requirements around connection use of system agreements, electricity supply agreements and licence amendments that act as barriers to wheeling arrangements must be addressed. Reducing administrative friction, ensuring consistency in the application of wheeling frameworks and ensuring non-discriminatory grid access are essential components to enabling fair market participation. The latest iteration of the rules is expected to be published for public comment this month.  

Revise electricity pricing policy: The policy is critical to guiding the evolution of electricity pricing as we transition to a more competitive, multi-market electricity system. It should provide guidance on cost-reflectivity and the unbundling of tariffs while ensuring electricity affordability. Matters around tariff concessions and cross-subsidies as is seen with negotiating price agreements and free basic electricity will take guidance from this document. The draft revised policy was meant to be tabled with Cabinet in May for consideration. It’s one of the key reform areas that should be finalised in 2026.

Accelerate transmission expansion: Limited grid access is the most immediate investment obstacle to new generation. The National Transmission Company South Africa only delivered about 271 km of lines against the 423 km target for 2025/26 owing to challenges such as limited domestic construction capacity, land encroachment and lengthy servitude negotiations. To meet our grid expansion targets, transmission rollout will have to scale up dramatically in the near term to 1 500 km a year. Programmes to bolster local construction capacity and the inaugural independent transmission procurement programme are important enablers for new grid capacity. 

Improving grid access: Given limited grid capacity, Nersa’s grid capacity allocation rules must be properly enforced and complied with to ensure grid access. Moving the grid capacity allocation function to the independent Transmission System Operator (TSO) is also essential to addressing competition concerns around grid access and supporting investor confidence. A high-level proposal on the TSO is expected to be tabled with the president in June, this will kick off the three-month phase 2 whereby a detailed implementation plan will be developed. 

Reform the electricity distribution industry: Municipalities should not be ignored in the transition of the electricity sector. Currently most are not in in a position to enable wheeling, limiting access for companies located there. Measures to address escalating municipal debt included a debt relief programme by Treasury, that was largely unsuccessful. Government’s focus has turned to Distribution Agency Agreements with Eskom to stabilise municipal debt. But that is only a short-term solution. The structural weaknesses in municipalities must be addressed through a formal electricity distribution industry reform programme, the draft paper for these reforms is currently with the Department of Electricity and Energy (DEE). The reform which will place municipalities on a path to financial sustainability, and importantly ensure improved service delivery, must be among the policy areas to be prioritised in 2026.

What matters now is sustained execution. These reform initiatives cannot proceed in isolation or at an uneven pace. If South Africa wants to convert industrial ambition into measurable outcomes, the different parts of the electricity reform agenda will need to be advanced together, with speed and consistency. For this reason, a cabinet-endorsed electricity reform roadmap, in development by the DEE and yet to be released for public consultation, is important to ensure a coordinated response while also providing a clear market target state with key roles and responsibilities identified across defined timelines.

This is also a useful lens through which to view this year’s Africa Energy Forum in Cape Town, where the focus was on Africa’s industrialisation. If the shared objective is to support Africa’s industrial future, then South Africa’s recent experience offers an important lesson: where reform unlocks private investment and customer choice, benefits can follow quickly. The task now is to maintain that momentum through coordinated implementation across the full reform programme.