The crisis forced a shift from bailouts to structural reforms
For over a decade, South Africa’s state-owned utility Eskom kept the lights on through bailouts and emergency diesel generators. The cost: massive debt, deteriorating coal plants, and daily blackouts.
By 2023, power plant availability had dropped to 55%, meaning nearly half of Eskom’s generation capacity was offline at any given time.
The power crisis stemmed from operational failures at Eskom that left plants vulnerable to breakdowns, and a closed market that blocked private companies from filling the gap. For years, the government provided bailouts that allowed Eskom to finance emergency fixes rather than address the root problem — poor maintenance.
In 2023, the government changed course.
Under the Eskom Debt Relief Act, the government took on 254 billion South African Rand (ZAR) (~US$15 billion) of Eskom’s debt but blocked the utility from borrowing more. The debt relief came with strict conditions: focus on maintaining existing plants, no new generation projects, and no new debt.
This forced Eskom to fix operational problems rather than finance its way out.
The government addressed utility operations and opened markets to private generation.
Coordinated through Operation Vulindlela (the presidential unit established to oversee reforms), the government pursued a two-part strategy:
- Fix what the utility can control. Eskom’s Generation Recovery Plan focused on intensive maintenance of existing coal plants, restoring 5,506 MW of capacity within one year, faster and cheaper than building new plants.
- Empower others to do what the utility can’t. The government opened the market to private generation through two mechanisms:
- Self-generation: In 2021, the South African government raised the licensing threshold for embedded generation from 1 MW to 100 MW, and subsequent reforms removed the cap entirely, eliminating licensing requirements for most private generation projects. The Electricity Regulation Amendment Act of 2024 restructured the electricity market by establishing an independent transmission system operator and enabling competitive electricity trading platforms. These reforms reduced regulatory barriers and enabled companies to use domestic banks for faster financing without requiring sovereign guarantees or complex project finance structures.
- Independent procurement: The Renewable Energy Independent Power Producer Procurement Programme bypassed Eskom for large-scale grid-connected energy. It created an Independent Power Producer Office to manage competitive auctions where developers bid to build utility-scale renewable energy projects under standardized contracts. This reduced transaction costs and removed Eskom’s conflict of interest in procuring power that could compete with its own generation.
The results: 300+ days without blackouts and ZAR200 billion in private investment.
Fixing utility operations while opening markets to private generation delivered measurable results:
- Eskom’s operational turnaround stabilized the grid. As of March 2026, South Africa has achieved 308 consecutive days without load shedding. Eskom saved ZAR9 billion (~US$550 million) in diesel costs year-on-year (a 59% reduction) by operating plants efficiently rather than relying on emergency generators.
- Private capital unlocked new generation at scale. Companies built 5,000 MW of solar capacity within 18 months of the licensing cap removal, with another 12,000 MW in the pipeline. The Renewable Energy Independent Power Producer Procurement Programme delivered multiple rounds of renewable energy procurement through transparent auctions where private developers bid to sell power to Eskom and other utilities via long-term contracts, attracting ZAR200 billion in private investment, and reducing dependence on Eskom’s aging coal fleet.
Together, these reforms strengthened the country’s economic growth outlook. GDP growth forecasts climbed from 1.3% in 2025 to 1.6% for 2026 and nearly 2% for 2027, as businesses regained confidence in power supply.
Two lessons for governments overseeing underperforming utilities
For African governments overseeing underperforming utilities, South Africa’s experience demonstrates how regulatory reforms can unlock results without waiting for new infrastructure or external capital.
- Prioritize operational reforms before investing in new capacity. Before building new power plants, assess whether maintenance and operational discipline at existing facilities can close the supply gap. Intensive maintenance programs can restore capacity years faster and at lower cost than new construction.
- Remove barriers to private participation when utilities can’t deliver. Governments should pursue two mechanisms: First, eliminate licensing caps that block private companies from participating in electricity infrastructure. Where creditworthy companies and functioning banks exist, businesses can finance projects using their own credit (rather than requiring government guarantees), filling capacity gaps faster. Second, create an independent office outside the utility to manage competitive procurement. This removes conflicts of interest and mobilizes private capital at scale.
South Africa’s turnaround offers a test case for what regulatory reform can achieve. By removing licensing barriers, creating independent procurement offices, and forcing operational discipline, the government unlocked existing domestic capacity faster than waiting for donor funding or new infrastructure. The next phase will reveal whether these gains can be sustained as Eskom navigates its financial challenges and transmission privatization moves forward. But the lesson is already clear: fix what utilities can control, empower others to do what they can’t, and don’t wait for perfect conditions to start.