11 February 2019

South Africa: Unbundling Eskom - the Good, the Bad and the Ugly

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Now that President Ramaphosa has announced a decision to unbundle Eskom into three separate state-owned entities -- Generation, Transmission and Distribution -- it is a good time to take stock of the announcement and where it leaves South Africa.

The good

The president gave some clear direction on the way forward in his State of the Nation Address (SONA). Regardless of your opinion on whether South Africa is best served with Eskom unbundled or a single entity, the announcement provided certainty and a clear direction.

A decision has been made, it comes from the top and leadership has been shown on a difficult issue. That it came from the highest authority in the country, and the ANC, does a lot to narrow down the possible discord and disagreement and most importantly lifts some of the burden of uncertainty that has hung over the issue for a while.

A crucial point raised by the president in his speech is that separating Eskom's divisions into separate units allows each entity to source funding on its own merits. This is important because it allows the transmission and distribution operations to deal with their future roles in the power sector independently and, most importantly,...

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