South Africa's Electricity Market Law Is Now in Force. The Hard Part Is the Grid and the Code
The Electricity Regulation Amendment Act, signed by President Cyril Ramaphosa in August 2024 as Act 38 of 2024, came into force on 1 January 2025, apart from amendments to the definitions of reticulation and distribution power systems. It is the most important change to the structure of South Africa's power sector since Eskom was corporatised. The Act provides for a Transmission System Operator, which must be established as an independent state-owned entity within five years, with the National Transmission Company South Africa acting as operator in the interim.
It creates an open market platform for competitive wholesale and retail trading, makes market operation a new activity licensable by the National Energy Regulator of South Africa, and requires a Market Code to set the rules for that market. The government presented the law as a pathway to competition, investment and lower costs. Our view is that the Act is necessary and well designed in principle, but that it is a frame rather than a market.
The central idea is to separate the parts of the power system that are natural monopolies from the parts that can be competitive. Laws that create electricity markets usually leave the detail to codes and rules, and that is where outcomes are decided. The Act opens the market, but the grid decides who can sell into it. The government has recognised this and has signalled private participation in transmission, through independent transmission projects in which private parties build and finance lines under long-term arrangements.
The Act allows up to five years for an independent operator to be established. In the near term, the market will matter most for large industrial buyers and private generators, who already contract bilaterally and will use a central platform to manage imbalances and trade surpluses. The Electricity Regulation Amendment Act is the right legal foundation for a sector that has suffered from a single-buyer model and a struggling incumbent.