Alarm bells for Eskom’s new company

Eskom has established a new company, but there are still serious questions over whether it will be fully independent.

Earlier this week, the National Transmission Company of South Africa (NTCSA) was finally created, marking a crucial step in transforming the nation’s electricity market.

The NTCSA is designed to manage the transmission of electricity nationwide. This will end Eskom’s longstanding monopoly on generation and enable different power generators to sell electricity to various customers.

The NTCSA will control the transmission network, including power lines, transformers, and the system operator.

It plans to invest R112 billion over five years, which could unlock roughly 11,000 MW of new connections.

“However, the market remains sceptical that the NTCSA will be allowed to operate truly independently,” said Roy Havemann from the Bureau of Economic Research’s (BER’s) Impumelelo Economic Growth Lab.

“This is a critical part of the reform process – the intention of a separate NTCSA is to operate as an independent system market operator so that it manages the liberalisation of the electricity market.”

“Even the branding remains clearly ‘Eskom – NTCSA’ with NTCSA in a substantially smaller font.”

“Optics aside, the corporate structure of Eskom remains unbundled – the NTSCA is a wholly-owned subsidiary and does not (yet) issue debt in its own name. The focus will be on how quickly substantive independence comes about.”

The Impumelelo Economic Growth Lab was launched last week as an independent hub for analytical research capacity to support economic reform.

The lab said that the four areas that would bring the most significant gains in the shortest time are:

• Electricity reforms – Sustain the reduction in load-shedding by maintaining momentum on the electricity programme

• Ports and rail reforms – Increase export volumes, particularly for industries that are job creators (agriculture and mining)

• Water – Improve service delivery would increase business confidence and encourage investment

• Crime, corruption, governance, and other reforms— Improve business confidence by removing the grey list, finalising visa reforms, and improving local government governance.

It believes that if the reforms are implemented quickly by the Government of National Unity (GNU), GDP growth could hit over 3% in 2025, which would substantially improve from the 0.7% seen in 2023 and the expected 1.0% for 2024.

In positive news, the NTCSA provided information on the state of renewable capacity to parliament, including:

• Rooftop PV (behind the meter) has increased by 3,800MW in 24 months.

• The highest output from the grid-connected renewable plants was 5 130 MW on 15 September 2023. This is equivalent to avoiding five stages of load shedding (each stage is 1,000MW).  

• On 20 February 2023, renewables supplied 21.8% of the country’s grid demand.  

Other reforms

There has been mixed news for other reforms in the country.

Ports reforms were dealt a blow after the Durban High Court granted an application by APM Terminals, a subsidiary of Danish giant AP Moller-Maersk, to halt the awarding of ICTSI, a ports operator from the Philippines, as the preferred bidder to concession Pier 2 of the Durban Container Terminal Pier.

Durban’s Piers 1 and 2 handle 65% of South Africa’s container volumes, with Pier 2 being the larger of the two.

“The court’s decision was not a surprise: against the advice of its own lawyers, Transnet used ICTSI’s market capitalisation as a measure of solvency when assessing ICTSI’s bid,” said Havemann.

In positive news, Home Affairs Minister Leon Schreiber gazetted visa reforms after a system had been in the works for several years.

One of the reforms has seen the introduction of a remote work visa, which allows foreign nationals who work for a foreign employer or who derive their income from a foreign source to work remotely from within South Africa.

That said, the remote working visa requires that the foreign national earn a gross income of at least R1 million per year.

“The new Points-Based System for Work Visas combats corruption and inefficiency by cutting red tape and introducing a transparent points scale to objectively determine who qualifies for a Critical Skills or General Work Visa,” added Havemann.

“The system uses an assessment of a foreign national’s age, qualifications, language skills, work experience, offer of employment and salary.”

“Both reforms will make it substantially easier for companies to hire foreign skills, which has been a significant constraint, mainly for domestic technology companies.”

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