In brief
South Africa's 2026 State of the Nation Address confirms an accelerated shift toward a competitive electricity market, underpinned by the unbundling of Eskom and the creation of an independent Transmission System Operator. With the ERAA already in force, government is pushing forward on implementing the Market Code from April 2026, establishing fair access rules, transparent pricing mechanisms and new participation pathways for IPPs, traders and prosumers. NTCSA's transition into the TSO and the rollout of the 14,000 km Transmission Development Plan aim to address longstanding grid constraints and unlock renewable energy corridors. While execution risks and regulatory bottlenecks remain, the reforms lay the structural foundations for a liberalised, investment‑friendly electricity system.
In more detail
South Africa's 2026 State of the Nation Address (SONA) marks a defining moment in the country's long-anticipated energy sector reform. Against the backdrop of chronic energy shortages and structural grid constraints, President Cyril Ramaphosa reaffirmed government's commitment to accelerating measures that aim to break Eskom's historical monopoly and usher South Africa into a competitive multi market electricity system aligned with global best practice.
SONA 2026: Government Pushes Forward on Market Liberalisation
In his 12 February 2026 address in Cape Town, President Ramaphosa reiterated the State's intention to fully unbundle Eskom and operationalise a state-owned, independent transmission entity. Building on the legal separation of the National Transmission Company South Africa (NTCSA) as an Eskom subsidiary in 2024, government now seeks to transition NTCSA into a stand alone Transmission System Operator (TSO).
The President announced the creation of a dedicated task team under the National Energy Crisis Committee (NECOM) to fast-track the remaining structural and regulatory steps, acknowledging that execution bottlenecks have delayed progress to date. The new transmission entity will:
- Own and expand the national transmission grid,
- Operate the national electricity market, and
- Guarantee non discriminatory access for all generators — a central condition for genuine competition.
These announcements reflect the policy direction envisioned in the Electricity Regulation Amendment Act 38 of 2024 (ERAA), which laid the statutory foundation for a competitive electricity trading environment.
Legal and Regulatory Framework: Implementing the ERAA
The ERAA, signed into law in 2024, aims to end Eskom's de facto monopoly by requiring the State to establish a competitive wholesale electricity market within five years. It mandates the creation of the TSO as a juristic entity distinct from Eskom, responsible for:
- Market operation (including scheduling and dispatch)
- System operation
- Wheeling and settlements
- Functioning as a central purchasing agency akin to market operators in liberalised jurisdictions.
Ministerial approval in December 2025 strengthened NTCSA's interim mandate pending full certification of the independent TSO. Once operationalised, the TSO will be responsible for fair, transparent settlements, grid coordination and maintaining a level playing field for both public and private generators.
Implementing Competition: Market Code Roll-Out and System Reform
A phased Market Code implementation begins in April 2026, progressing towards full market functionality by 2031. The Market Code, drawing on models used in advanced competitive markets, will regulate:
- Participation rules for generators, traders and "prosumers"
- Use-of-system charges and grid access methodologies
- Market transparency, disclosure and financial settlement mechanisms
- System balancing requirements to ensure reliability as renewable penetration increases.
The reforms align with South Africa's broader policy of open market electricity trading, as anticipated in earlier drafts of the Electricity Regulation Bill. Once the market is operational, registered electricity traders and independent power producers (IPPs) will be able to contract directly with customers or sell into a centralised pool—an arrangement comparable to Nordic style exchanges.
Parallel to regulatory developments, NTCSA has committed to the 14,000 km Transmission Development Plan, aimed at strengthening grid capacity, unlocking renewables corridors and reducing congestion that has historically skewed access in Eskom-favoured nodes.
Codes under development by NERSA (following the September 2024 public comment phase) will be crucial in finalising operational and pricing frameworks, renewable allocation methodologies and investor-protection mechanisms.
Challenges: Execution Risk and Regulatory Delays
Despite clear policy momentum, several obstacles remain:
- Institutional resistance: Elements within Eskom have been slow to transition operational responsibilities.
- Regulatory delays: Finalising market rules and certifying the TSO remain on the critical path.
- Grid capacity constraints: Persistent backlog in grid access applications could delay private participation.
- Private onboarding timelines: Full market participation may only materialise several years into the 2030s, despite the start of Market Code rollout in 2026.
These risks have been reflected in investor commentary, including concerns flagged in multiple energy-sector analyses across South African financial and business media.
Outlook: A Gradual but Structural Shift Toward a Liberalised Market
South Africa's direction is unequivocal: transition from a vertically integrated monopoly to a competitive, rules-based electricity market. Global investors view the ERAA-driven reforms favourably, particularly given their alignment with trends across liberalised African and international markets.
If executed on schedule, the reforms promise:
- A more resilient and cost-reflective electricity system
- Greater renewable energy integration
- Transparent pricing determined by supply-demand fundamentals
- Increased private investment in transmission and generation.
However, the pace of implementation will determine whether the reforms meaningfully ease South Africa's energy constraints in the medium term.