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South Africa’s electricity crisis – governance, challenges, and reform lessons

South Africa’s energy sector is undergoing a transformation. The suspension of load shedding—planned, rolling power outages to prevent grid collapse — for over 300 days signals progress in stabilizing electricity supply. However, rising electricity prices and deep-rooted structural issues overshadow these gains. Eskom, the state-owned electricity provider, continues to struggle with financial instability, aging infrastructure, and governance issues. As the country works toward a more sustainable energy system, lessons from the UK and Chile offer valuable insights.

Before 1994, South Africa's electrification rate was about 53.6%. By 2018, 90% of the country could access electricity, but Eskom struggled to meet the growing demand. By 2008, power outages were frequent and Eskom repeatedly failed to sufficiently maintain and upgrade its aging infrastructure. The utility has faced mismanagement, corruption, and leadership instability, with 15 different CEOs between 2007–23. These issues became emblematic of state capture—a phenomenon where public institutions are repurposed to serve private and political interests at the expense of governance and service delivery.

Eskom lost an estimated ZAR 1 billion per month to corruption and theft during former CEO André de Ruyter’s tenure. These challenges led to a massive debt burden, with Eskom’s debt reaching ZAR 440 billion (about USD 30 billion) by 2019—around 15 % of South Africa’s total national debt. Eskom’s governance issues extend beyond leadership according to the Generation Operational Recovery Plan—increased planned maintenance and reduced reliance on diesel for emergency power.

Historically, fragmented oversight—split between multiple ministries and regulatory bodies—created inefficiencies in decision-making. While recent efforts have improved operational efficiency and grid stability, deeper structural problems remain. These include a lack of investment in new generation infrastructure and outdated coal plants. As of 2022, coal accounted for 84.4% of South Africa's electricity generation, and many plants are nearing the end of their 50-year lifespan, contributing to frequent breakdowns and power outages.

The government aims to diversify the energy mix, targeting the decommissioning of 34 GW of coal-fired power capacity by 2050 and the construction of 20 GW of renewable power generation by 2030. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has helped increase renewable capacity through long-term contracts for independent producers. However, more efforts are needed to meet the renewable energy target of 17,800 MW capacity by 2030 and address the current shortfall of 4,000–6,000 MW to support economic growth.To address its energy challenges, South Africa can learn from international examples of successful energy sector reforms, notably the the UK and Chile.

Liberalization and privatization in the UK
 

The UK began reforming its energy sector in the 1980s with a focus on privatization and market competition. Between 1979–90, more than 40 state-owned businesses, employing approximately 600,000 workers, were privatized to improve efficiency and drive competitiveness. At the time, the UK faced a centralized electricity monopoly, aging infrastructure, and operational inefficiencies, challenges similar to those in South Africa. The UK unbundled its state-owned electricity provider, allowing independent power producers to compete in the market. This liberalization improved efficiency, lowered prices, and encouraged investment in renewable energy. The UK’s transition to a low-carbon energy system was driven by market-based policies, regulatory oversight, and incentives for clean energy.

While the UK’s reforms were not without challenges, they ultimately demonstrated the benefits of dismantling a monopoly and introducing competition in power generation and supply. By separating generation, transmission, and distribution, the UK prevented any single entity from controlling the entire electricity supply chain, fostering a more competitive and efficient market. The UK’s experience highlights the importance of structured market liberalization, a lesson South Africa can use as it works to reform Eskom and diversify its energy sector. South Africa has taken steps toward unbundling Eskom, including the establishment of the National Transmission Company South Africa (NTCSA), an important milestone. However, challenges persist, particularly in ensuring grid stability, regulatory transparency, and integrating independent power producers (IPPs). The UK’s experience underscores that a well-regulated transition, independent oversight, and clear incentives for private sector participation are essential to avoid deregulation pitfalls while benefiting from competition.

The case of Chile
 

Chile’s energy reform, which began in the late 1970s, offers another valuable model, with a slightly different approach from the UK’s privatization model. Rather than focusing on privatizing state-owned utilities, Chile’s reforms centred on creating a competitive energy market, where independent generators could sell energy to large consumers and distribution companies. Privatizing electricity generation led to increased investment in energy generation capacity, and Chile has maintained competitive electricity prices. Chile’s model emphasizes creating conditions that foster competition and efficiency, rather than relying solely on privatization or unbundling.

By decentralizing decision-making and removing political interference, Chile improved its energy sector’s performance and ensured a reliable supply. Chile’s experience highlights that energy reform isn’t just about breaking up monopolies, but about designing a system that promotes long-term competition. For South Africa, this means ensuring grid access for independent producers, streamlining regulatory processes, and reducing political interference in energy markets. While South Africa has already introduced private participation in renewable energy through the REIPPPP, Chile’s model shows that further market liberalization and improved grid accessibility can accelerate investment without necessitating full-scale privatization.

Both the UK and Chile provide good insights into how market reforms, competition, and strategic policy can address challenges similar to those South Africa faces with Eskom.

The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.