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Engineering News editor Terence Creamer discusses the approval of a revised unbundling plan for Eskom and the potentially far-reaching implications for both the State-owned company and the framework governing the transition to a more competitive market structure,

As the sun sets on 2025, South Africa's long-awaited recovery is becoming visible like the first sliver of a waxing crescent days after a new moon.

While still modest, the 0.5% GDP expansion in the third quarter represents the longest period (four consecutive quarters) of sustained growth by the South African economy since Covid.

The performance followed the decision by S&P Global to upgrade South Africa's credit rating in November; the first upgrade in 20 years, a period during which the country's rating fell to a sub-investment grade (from which it is yet to recover) amid State capture, extreme loadshedding and a collapse in confidence and investment.

The upgrade was announced days after a solid Medium-Term Budget Policy Statement performance by the National Treasury and days before South Africa's successful hosting of the G20 Leaders' Summit.

The gloss has been taken off somewhat by the petty behaviour of President Donald Trump in attempting to exclude South Africa from the G20 in Miami and wipe out any digital trace of the Johannesburg event.

Nevertheless, the gathering showed that many governments around the world are wary of the ongoing dismantling of a rules-based multilateralist system in favour of transactional dealmaking, particularly as multipolarity starts to define the emerging order.

It also provided the stage for some European leaders to begin pushing back against the US. This, after it became apparent during the summit that Trump's unilateral peace plan for Ukraine and Russia was heavily weighted in favour of Russia.

Having seen the 'crescent', however, will South Africans ever see the 'whole of the moon' mythologised in the classic 1980s song by the Waterboys?

In the South African context , that would imply growth of more than 3% for a sustained period so as to lay the basis for serious employment creation, as well as the revenue growth required to begin addressing the socioeconomic backlogs that continue to leave the majority of South Africans in dehumanising poverty.

Of course, growth alone will be insufficient.

Unless there is far better governance, resources will continue to be wasted, and services will not improve.

Without ethical political leaders and executive managers, corruption will continue to eat away at the pillars of democracy and make the threat of a Mafia State almost impossible to resist.

Without far better law enforcement, crime will continue to erode confidence and deter investment.

Nevertheless, without growth , it is going to be almost impossible to advance towards a more economically fair dispensation.

Growth remains a necessary ingredient for funding the soft and hard infrastructure required for the development of South Africa, as well as to begin truly aligning the lived reality of those who reside here with the rights-based vision of the Constitution.

The platform has been laid for higher growth by the progress made in tackling the confidence-sapping electricity and logistics crises and in stabilising the macroeconomic framework. Now is the time to truly build on that platform.

The National Automobile Dealers' Association (NADA) says there are growing signs of gains being made in the South African economy, despite the fact that several structural challenges remain.

According to the dealer body, these improvements could support increased confidence across the new-vehicle market going into 2026.

NADA chairperson Brandon Cohen says recent macroeconomic signals have been encouraging.

"We are seeing interest rates beginning to ease, rand volatility settling, and far greater operational stability from Eskom and Transnet.

"Alongside better-than-expected GDP performance, these factors are creating a more supportive environment for both consumers and businesses."

Cohen says dealers are reporting slightly improved consumer confidence, supported by more favourable financing conditions, even if consumers remain cautious about how they spend their money.

Stabilising economic indicators are also encouraging renewed interest from fleet buyers, while well-structured dealer incentives are helping to ease pressure on household budgets.

Cohen stresses, however, that these improvements need to be considered alongside ongoing challenges.

"Municipal deterioration, concerns around crime and law-enforcement effectiveness, as well as political uncertainty ahead of the 2026 municipal elections all continue to weigh on public sentiment."

Looking Towards 2026 While it is difficult to predict how the new year ahead will unfold, there are a number of developments, both locally and globally, that may influence sentiment and operating conditions as South Africa heads into the new year, says Cohen.

The first is South Africa's municipal elections, which may shape the public mood, as well as service-delivery priorities.

Within an arena that features new political parties and shifting political dynamics, the months leading up to the elections could influence overall sentiment.

US mid-term elections may also have an effect, as political outcomes in this major economy often ripple through global markets.

While the direct impact on South Africa is difficult to quantify, shifts in US policy and economic direction may influence global trade and investor confidence, notes Cohen.

Thirdly, as AI continues to expand rapidly across industries worldwide, it remains to be seen whether this cycle strengthens further or starts to level out.

Any shift in the pace of AI adoption could influence job structures and economic opportunities, particularly in developing markets, says Cohen.

Recent improvements in South Africa in terms of electricity stability, port performance and ratings-agency sentiment are encouraging, he adds. The question for 2026, however, is whether these gains are sufficiently sticky to support broader economic growth and job creation.

As for the influx of new models into the South African new-vehicle market, particularly from India and China, Cohen says the pace of new entries may begin to level out as the market adjusts to the increased variety.

"All of these shifts, both at home and internationally, highlight how many moving parts influence our environment.

"While nothing is guaranteed, there is room for cautious optimism if the current momentum continues."

The National Transmission Company South Africa (NTCSA), which is set to remain an Eskom Holdings subsidiary and owner of the transmission assets, has moved to explain the role of the yet-to-be-created Transmission System Operator (TSO) under the revised and newly endorsed unbundling strategy.

The strategy has been approved by Electricity and Energy Minister Dr Kgosientsho Ramokgopa and will see Eskom Holdings retain not only the NTCSA as a subsidiary, but also the National Electricity Distribution Company of South Africa, as well as an entity currently dubbed GenerationCo, which will hold its legacy generation assets, and a new Eskom Green subsidiary to house its renewable-energy business.

A separate TraderCo would also be set up by Eskom Holdings to operate alongside other licensed traders in a more open electricity market.

Under the strategy, which is expected to be fully implemented by 2030, the NTCSA will continue to own and expand the high-voltage transmission grid, and roll out the Transmission Development Plan (TDP) of some 14 000 km of new powerlines and associated grid infrastructure.

In a statement following the approval, NTCSA also sought to outline the responsibilities of the TSO, once it was set up as a new State-owned company outside of Eskom Holdings, but without the transmission assets.

As a transmitter, the TSO would develop and execute the TDP, maintain and operate the transmission grid, and provide nondiscriminatory access to that grid to all market participants, the NTCSA said.

As system operator, it would operate the integrated power system and balance supply and demand in real time.

As market operator, the TSO would establish and manage a transparent, nondiscriminatory electricity trading platform in compliance with market codes and rules issued by the National Energy Regulator of South Africa (Nersa), to ensure competitive trading between generators, traders and customers.

As the central purchasing agency, the NTCSA said the TSO would act as buyer of electricity from generators, including Eskom (through GenerationCo and Eskom Green) and independent power producers (IPPs), and facilitate power purchase agreements.

The other responsibilities of the TSO would be to support ancillary services such as frequency control and voltage regulation to maintain system reliability.

In keeping with separate statements issued by Eskom and Ramokgopa, the NTCSA said the revised unbundling strategy met the requirements of the Electricity Regulation Amendment Act, which came into force in early 2025 and which set a five-year timeframe for the establishment of an independent TSO.

NTCSA CEO Monde Bala insisted that the TSO would be fully independent of the NTCSA and Eskom Holdings and would provide transparent and unbiased access to the transmission network, under the regulatory oversight of Nersa.

"This will enable energy security and removes Eskom from the potential conflict of interest that may exist in relation to its dual role of being a generator and owner-operator of the transmission grid," Bala said.

Some initial concerns have been raised, however, about whether the approved model would decisively remove the conflict of interest associated with Eskom being the dominant generator while owning the grid; one that has been blamed for inadequate investment in strengthening and expanding the grid and the difficulties IPPs still have in securing connection agreements.

For their part, Ramokgopa and Eskom highlighted the financial and operational risks of unbundling the TSO with the transmission assets, with the Minister stating that the revised approach preserved the "financial stability of the Eskom Group by minimising disruptions to its highly leveraged balance sheet, thereby mitigating risks to both Eskom and national energy security".

Meanwhile, Eskom Holdings CEO Dan Marokane argued that the chosen framework would enable the "fastest and most orderly transition", while providing "strategic certainty for lenders and bo...

A new Eskom unbundling strategy, which uncouples the grid assets from the system operator role to be performed by a separate and yet-to-be-established transmission system operator (TSO), has been approved by Electricity and Energy Minister Dr Kgosientsho Ramokgopa.

Under the strategy, the National Transmission Company South Africa (NTCSA) will continue to own, expand and maintain the national grid and will also remain a subsidiary of Eskom Holdings.

In a statement, Ramokgopa said a legal and regulatory process would now be initiated for the creation of a fully independent TSO as envisaged in the Electricity Regulation Amendment Act (ERAA).

The TSO would perform the functions of system operations, market operation and central purchasing, while ensuring non-discriminatory access for market participants and enabling the emergence of a competitive wholesale electricity market.

The Minister said the proposed approach aimed to "preserve the financial stability of the Eskom Group by minimising disruptions to its highly leveraged balance sheet, thereby mitigating risks to both Eskom and national energy security".

The ERAA, which was passed in 2024 and came into force at the start of 2025, provides a five-year time horizon for the creation of an independent TSO; an entity seen as key to ensuring a level playing field between generators in a future competitive electricity supply industry.

Ramokgopa argued that the revised unbundling strategy was "meticulously aligned with the ERAA".

The decision follows much debate about the future structure of the TSO, with several commentators having argued in favour of the NTCSA's full separation from Eskom Holdings, with its assets, to form the new TSO.

However, Ramokgopa, who is also Eskom's shareholder Minister following the disbandment of the public enterprises ministry and department, has opted to support a different model; one that also has the support of the Eskom Holdings Board.

"Eskom is now poised to implement this refined strategy in a phased approach, ensuring careful management of financial and operational risks while developing the necessary skills, systems, and institutions for a competitive electricity market," the statement reads.

The South African Photovoltaic Industry Association (SAPVIA) says demand for solar PV in 2025 continued to recover from the 2024 slowdown, which followed on from the loadshedding-induced surge of 2023 when 2.4 GW of capacity was installed.

New installations contracted last year to about 1 GW, but have since recovered to above that level in 2025.

This, largely on the back of utility-scale private-offtake projects, the pipeline for which remains robust, with some 4 GW of new PV projects registered with the National Energy Regulator of South Africa (Nersa) in 2025, increasing overall renewables registrations to about 16 GW and with solar registrations standing at above 11 GW.

While not all registered projects will be converted into installations, SAPVIA CEO Dr Rethabile Melamu says the private-offtake pipeline, together with projects awarded under recent public procurement bidding rounds and a recovery in the embedded-generation market could result in yearly installations exceeding 3 GW in the coming few years.

Spokesperson Frank Spencer says the positive demand outlook is underpinned by the steep fall in PV costs, which is continuing to strengthen the competitiveness of solar installations in a context where tariffs for conventional electricity continue to rise.

Together with the fall in battery storage costs, Spencer believes there is also a growing incentive for microgrids, where solar is not only used during the day, but is stored in batteries for use during the evening peaks.

Deputy chairperson De Villiers Botha, who focuses primarily on the embedded generation market, argues that while PV installations reached grid parity in about 2015, there are signs that microgrid systems are also now at grid parity.

"There's a lot of interest in microgrid systems, where solar together with battery energy storage systems, together with the grid, and sometimes together with old diesel generators are supplying sustainable, cleaner and continuous power in commercial, industrial and agricultural settings," Botha explains.

Given this positive market outlook, Melamu is also bullish about the potential for job creation and industrialisation spin-offs from the sector.

However, speaking against the backdrop of a court case brought by ARTSolar against various government Ministers, Eskom, Nersa and several independent power producers in a bid to have an exemption on local content stipulations in relation to locally assembled PV modules set aside, she argues in favour of a full value-chain approach.

While making no direct reference to the legal action, Melamu indicates that it will require a suite of fiscal incentives to position local industry to compete with China, which manufactures about 75% of the world's PV modules.

By contrast, studies published by SAPVIA in 2023 and 2024 highlight the potential to industrialise various other parts of the supply chain, mostly in the absence of fiscal incentives.

The studies point in particular to cables and combiner boxes, mounting structures and trackers, inverters, electrical and civil balance of plant components, as well as recycling and reuse.

Solar modules make up about 20% of the value of a solar PV facility, she says, while arguing that most of the components that make up the other 80% can be manufactured locally.

"So it's really a decision of whether we are all willing to pay 40% to 50% more for electricity than we currently are to accommodate the incentives that would be required to really scale-up manufacturing, especially solar PV modules."

SAPVIA also stresses that the bulk of the employment opportunities in the solar industry reside in the installation, operations and maintenance of such systems, with module manufacturing having become highly automated.

Eskom has signed a memorandum of understanding (MoU) with Samancor Chrome and the Glencore-Merafe Chrome Venture in a bid to finalise an electricity tariff solution that prevents the closure of additional smelting capacity, and averts the threat of widespread job cuts in the sector.

In a statement, Eskom said a joint task team had been set up to develop the intervention following what the State-owned company described as constructive engagements held on December 5 with Electricity and Energy Minister Dr Kgosientsho Ramokgopa and organised labour.

The talks followed the initiation by Samancor Chrome and the Glencore-Merafe Chrome Venture of Section 189 retrenchment processes that could affect close to 5 000 workers.

In a separate statement, the Glencore-Merafe Chrome Venture reported that the MoU would extend collaboration and engagement aimed at finding a workable energy solution for the ferrochrome industry by no later than the end of February.

"As a result of this agreement, the Venture will seek to conclude arrangements with consulting parties to extend the Section 189 consultation period until 28 February 2026 and regulate the terms and conditions of this proposed extension.

"This extension demonstrates the Venture's commitment to engaging constructively with government and other stakeholders to find a viable solution that can save jobs and support competitive beneficiation in South Africa."

However, the statement fell short of the National Union of Mineworkers' (NUM's) call for the ferrochrome industry to formally commit to a three-month moratorium on all retrenchments and smelter closures.

In fact, Glencore-Merafe Chrome Venture indicated that the Section 189 process in relation to Project Phoenix streamlining and right-sizing of operations remained unaffected by the MoU.

Eskom CEO Dan Marokane said a multi-stakeholder task team would be set up to seek to finalise a strategy that supported industrial competitiveness while ensuring that the electricity-pricing solution did not impose additional burdens on other customers.

No details were provided regarding how other customers would be protected, however, with the cost of previous negotiated pricing agreements (NPAs) with electricity-intensive companies having hitherto always been borne by standard tariff customers.

The current distress in the ferrochrome industry had arisen despite the fact that the smelters secured regulatory approval in October 2023 for six-year NPAs, which provided access to lower-cost tariff structures.

The NUM offered specifics, reporting that the ferrochrome industry had indicated that the current Eskom tariff of R2.12/kWh was unsustainable.

"During a meeting last Friday with the Minister of Electricity, Kgosientsho Ramokgopa, the government proposed lowering the tariffs to 87.7c/kWh. The industry requested a competitive energy tariff of 62c/kWh," the NUM revealed.

Earlier this year, both Samancor Chrome and the Glencore-Merafe Chrome Venture activated the hardship provisions of their NPAs as market conditions deteriorated and rising electricity costs became increasingly difficult to absorb. Since 2008, electricity tariffs in South African have surged by over 900%.

Eskom then applied for a temporary waiver of take-or-pay obligations, which the National Energy Regulator of South Africa (Nersa) approved for a limited period, which helped stabilise operations temporarily.

It was confirmed in the statement that Nersa was currently processing an application for an interim tariff adjustment for the smelters.

"Once the interim tariff is approved, the smelters have committed to suspend the Section 189 retrenchment process and bring 40% of their furnace capacity back online while the long-term solution is developed under the MoU," Eskom said in a statement on December 8.

In parallel to the electricity tariff relief, government would work on a "complementary mechanism" to support a more competitive pricing path for the sector, which is expected to be final...

Engineering News editor Terence Creamer discusses rail company Traxtion's announcement of a R3.4-billion investment in locomotives and wagons to begin operating on South Africa’s mainline freight network, as well as the significance of this investment.

The producer of a diverse range of well-known household brands - from Sunlight soap and OMO washing powder, to Vaseline and Robertsons Spices - reports that it has increased the local content in the products it manufactures in South Africa to 80% from a level of only 40% in 2019.

The brands are all produced by Unilever South Africa, which manufactures 95% of the products it sells locally.

MD Justin Apsey tells Engineering News that, while the group has always aspired to increase the domestic content of the inputs used by its six South African factories, the step change over the past five years can be attributed to having embedded localisation as a business rather than a social imperative.

This commercial rationale is underpinned by a desire to improve the resilience of its supply chains, the vulnerability of which was exposed during the Covid-19 pandemic.

As a result, Unilever South Africa reassessed its localisation strategy, uncoupling it from its prior corporate social responsibility focus.

A partnership model has since been implemented, whereby the small and medium-sized enterprises selected to supply the group are expected to operate independently of the demand generated by its procurement. Previously, the strategy was based on supporting entrepreneurial enterprises in a way that made them fully reliant on the group.

R100M LOCALISATION FUND

The re-engineered strategy has been backed financially by a R100-million empowerment and localisation fund, capitalised fully by Unilever South Africa.

The fund extends interest-free loans to partner companies, which use the finance primarily to invest in the capital equipment they require to scale up to meet Unilever's demand, albeit not exclusively.

In addition, it is supported on an ongoing basis by the group's R12-billion to 14-billion in yearly total supply-chain costs, including procurement, with Apsey indicating that about R3.5-billion of that spend is now with small and medium-sized firms.

The results have been impressive across most of its manufacturing sites, which in Gauteng include a laundry powders factory in Boksburg, a household liquids facility in Anderbolt, and an ice cream plant in Johannesburg. In KwaZulu-Natal, meanwhile, Unilever has a personal and beauty care plant at Maydon Wharf, in Durban, a deodorants facility in Phoenix, and a foods factory in Riverhorse Valley.

Among the highlights has been a R30-million investment that has enabled a company known as Temong to invest in local steam-sterilisation infrastructure, which has opened supply chains to smallholder farmers producing chilies and coriander.

Apsey says the investment has resulted in a chilli-growing partnership in Jozini, in KwaZulu-Natal, which has involved external training partners and close collaboration with the Department of Agriculture and the local municipality.

Unilever has also backed a R10-million investment to enable Afrozonke to produce chemicals locally that were previously imported, as well as R6-million to support Just Pink, a women-led merchandising business that now services 197 Clicks stores.

NEXT 10% WILL BE HARDER

The local-content gaps in its supply chain are mapped on an ongoing basis by Unilever's procurement team and Apsey says that mapping shows that raising local content from 80% to 90% will prove far more challenging.

Not only is the pipeline of potential suppliers far less developed, but major capital investments would be required to produce the next set of chemicals, plastics, and fragrances required to raise local content further.

He says Unilever's demand alone will be insufficient to make such projects viable and that an industry-wide effort will be required, and involve collaboration with historical competitors.

Government is aware of the issues and the competition authorities have offered the industry an exemption to cooperate where it can be shown that such cooperation is in support of industrialisation.

Raising local content further across the sector could have si...

Six local lithium battery and inverter manufacturers have joined forces to form the South African Battery Manufacturers Association (SABMA) in an effort to raise awareness of the country's energy storage prowess and champion South Africa as a global production hub.

Formed officially in October by Balancell, BlueNova Energy, Creslow Energy Solutions, Freedom Won, maxwell+spark and Solar MD, SABMA aims to promote the growth of the domestic manufacturing sector and advocate for industry-friendly trade and industrial policy.

De facto chairperson and initiator of SABMA, Dr Louis Serfontein, who is also head of business development at Freedom Won, tells Engineering News that the founding members are convinced that South Africa has the resources, intellectual property and industrial capacity and capability to become a global energy storage leader.

However, he also reports that the industry is facing significant challenges currently with its survival threatened by unfair trade practices and by the fact that it is being overlooked during the public procurement of large industrial and utility-scale battery energy storage systems (BESS).

SABMA's immediate priority, therefore, is to lobby for an update to the country's tariff code to distinguish between the importation of battery cells, which South Africa does not currently produce, and battery systems, which it does.

Serfontein is convinced that, in time, South Africa could leverage the region's reserves of lithium, manganese, cobalt and vanadium and its battery know-how to participate in the full battery value chain, including cell manufacturing and position Southern Africa as an exporter of high technology and not only raw materials and smaller batteries and inverters.

In the interim, however, it will need to safeguard its existing manufacturing capacity by ensuring that it is not overwhelmed by imports, he argues, with SABMA members keen to be part of a government programme that stimulates local manufacturing.

In addition, SABMA intends lobbying for a formal local-content designation for South African-manufactured batteries and inverters in the public procurement of utility-scale systems.

"While local companies have built a strong reputation in the residential market, the utility-scale and industrial battery markets remain dominated by imports," Serfontein states.

"These systems are modular in design, so there is no reason why local batteries should be excluded as they are currently."

Local large users, driven by local content or not, will always be better served by a locally based company, Serfontein avers.

"Projects don't end at their commercial operation date, they start, and only local support can service and augment the technology involve to last the expected 20-plus years.

"It is thus in the interest of any large user, government and parastatal alike, to invest in local manufacturing and the associated skill and capacity development."

He stresses that SABMA also intends marketing the capabilities of the domestic industry to consulting engineers that specify the batteries in utility projects, as well as to the engineering, procurement and construction contractors that implement BESS projects.

"Our biggest frustration is that most of the ecosystem is unaware that Africa has this high-tech ability.

"Most automatically assume that it all has to come from China whilst we have arguably been at it for the same time if not longer," Serfontein says.

SABMA also intends working with government and private stakeholders on the implementation of the South African Renewable Energy Master Plan, which has been launched to support the industrialisation of components linked to solar, wind and battery installations.

Serfontein says SABMA already has support from the Department of Trade, Industry and Competition, including in relation to its aims of accelerating local battery manufacturing, promoting high standards, and positioning the country as a regional leader in advanced energy storage techn...