Former Eskom chief André de Ruyter has laid out a blueprint for cutting South Africa's electricity costs, pointing to Australia's competitive energy market as a model the country could follow. The proposal arrives as households and businesses across Southern Africa continue to grapple with some of the world's highest power tariffs.
The Monopoly Problem
South Africa's state-owned utility Eskom controls the vast majority of the country's electricity generation and distribution. This monopoly structure has long been cited as a root cause of inefficiency and inflated costs. De Ruyter, who served as Eskom chief executive before resigning in 2023, argues that breaking this stranglehold is essential for bringing prices down to manageable levels.
The utility has accumulated massive debt, partly driven by spending on the Medupi and Kusile coal plants that ran billions over budget and years behind schedule. Those cost overruns have been passed on to consumers through higher tariffs. South African residential customers now pay roughly 185 South African cents per kilowatt-hour, a figure that has climbed steadily since the early 2000s.
De Ruyter's proposal centres on introducing genuine competition into the generation market. Australia deregulated its energy sector in the early 1990s, allowing multiple generators and retailers to compete. The result has been a market where prices, while still volatile, respond to supply and demand rather than a single state entity's cost structures.
Renewables as a Pressure Valve
Beyond structural reform, de Ruyter highlights renewable energy as a tool for reducing the price of new generation capacity. Solar and wind costs have fallen sharply globally, and South Africa has begun awarding contracts to independent power producers. The country's Renewable Energy Independent Power Producer Procurement Programme has brought several gigawatts of clean energy online since 2011.
The challenge lies in integrating these sources into a grid still dominated by coal-fired baseload plants. Eskom's transmission network requires upgrades to handle distributed renewable generation. Private investment in grid infrastructure, de Ruyter suggests, could accelerate this process while reducing the burden on state finances.
What This Means for the Region
South Africa's electricity crisis does not stay within its borders. The Southern African Development Community grid connects several nations, and load-shedding events in Johannesburg can ripple outward, affecting industrial consumers in neighbouring countries. When South African smelters and mines reduce operations during power shortages, commodity supplies tighten across the continent.
Nigerian manufacturers and traders who rely on goods transiting through South African logistics corridors have felt these effects. A more stable South African power system would reduce uncertainty for businesses throughout the region. Lower electricity costs in South Africa would also improve the competitiveness of its industrial sector, which competes with Nigerian firms for export markets in Europe and the Americas.
Energy analysts have long pointed to South Africa's electricity sector as a bellwether for broader African infrastructure challenges. The continent's power generation gap costs economies billions in lost output annually. Solutions that work in Johannesburg could be adapted elsewhere, from Nairobi to Lagos.
The Path Forward
De Ruyter's framework faces significant political obstacles. Eskom employs tens of thousands of workers, and any restructuring that threatens jobs will encounter fierce resistance from unions. Electricity is also a politically sensitive topic in South Africa, where the ruling party has historically maintained close ties to the mining and energy sectors.
The South African government has floated the idea of splitting Eskom into separate generation, transmission, and distribution entities. This would create multiple entities that could eventually be privatised or opened to private equity investment. Regulators would then oversee access to the transmission network, preventing any single player from dominating the market.
Finance Minister Enoch Godongwana has indicated that cabinet discussions on electricity reform will continue through the first half of the year. Business groups are pressing for concrete action, arguing that without lower power costs, South Africa cannot attract the investment needed to address its unemployment crisis.
What happens next will be closely watched across Africa. Nigeria's own power sector faces similar challenges: state-dominated generation, transmission bottlenecks, and tariffs that do not fully reflect costs. Whether South Africa moves toward a more competitive model may influence how Abuja approaches its own energy reforms in the years ahead.
Lower electricity costs in South Africa would also improve the competitiveness of its industrial sector, which competes with Nigerian firms for export markets in Europe and the Americas.Energy analysts have long pointed to South Africa's electricity sector as a bellwether for broader African infrastructure challenges. Solutions that work in Johannesburg could be adapted elsewhere, from Nairobi to Lagos.The Path ForwardDe Ruyter's framework faces significant political obstacles.
