From Eskom Blues to Infrastructure Gold: Positioning South Africa’s Independent Transmission Projects as a new Investable Asset Class

By Nadia Nassiep | Associate

On 12 February 2026, during his State of the Nation Address, President Cyril Ramaphosa reaffirmed government’s commitment to establishing a fully independent, state-owned transmission entity with ownership and operational control over South Africa’s transmission assets. This announcement provided decisive policy clarity following earlier restructuring proposals that had created uncertainty regarding the extent of separation between transmission operations and Eskom.

The President’s statement signalled an unequivocal pivot toward full structural unbundling, reinforcing the framework contemplated in the Electricity Regulation Amendment Act 38 of 2024 (“ERAA”). Business Leadership South Africa welcomed the clarification, noting that it restored confidence in government’s reform trajectory and confirmed the establishment of an independent Transmission System Operator (“TSO”). The announcement of a dedicated task team under the National Energy Crisis Committee to resolve implementation matters within defined timeframes further addressed investor concerns regarding policy coherence and execution risk.

This political reaffirmation is foundational to the investment case for Independent Transmission Projects (“ITPs”). Transmission independence is not merely an institutional reform; it is the structural precondition for attracting long-term private capital into grid infrastructure.

Legislative Reform and Structural Unbundling

The ERAA, effective from 1 January 2025, establishes a legally distinct Transmission System Operator SOC Limited responsible for system operation, market operation, and central purchasing agency. By ring-fencing governance and operations, the Act separates transmission from Eskom’s generation and distribution businesses and alters the underlying risk profile of grid infrastructure.

Historically, transmission expansion was financed directly through Eskom’s balance sheet. Institutional investors, pension funds, commercial banks, and bondholders provided capital at utility level, often supported by explicit or implicit sovereign backing. Risk exposure was therefore linked to Eskom’s consolidated debt burden and governance performance rather than to discrete transmission assets. As Eskom’s financial position deteriorated, this model constrained infrastructure expansion, making grid development dependent on sovereign risk tolerance and balance-sheet capacity rather than project-level viability.

The Rise of ITPs

The introduction of ITPs represents a structural departure from this utility-funded approach. Instead of channelling capital into Eskom as a vertically integrated monopoly, investors now participate in concession-based, ring-fenced project vehicles. This model closely resembles the Independent Power Producer framework implemented in generation, where revenue certainty is anchored in long-term contractual arrangements rather than corporate balance-sheet support.

For purposes of Phase 1, National Treasury materials reference NTCSA as the TSA buyer/counterparty, pending completion of the full TSO institutional arrangements envisaged under the ERAA.

The first phase of ITP procurement includes approximately 1,164 kilometres of 400 kV transmission lines and associated transformation capacity across the Northern Cape, North West, and Gauteng. These projects are aligned with the Transmission Development Plan TDP 2025-2034 (prepared by the National Transmission Company of South Africa (“NTCSA”)) and prioritise critical evacuation corridors in grid-constrained regions.

Under this framework, private consortia design, finance, construct, operate, and maintain transmission infrastructure for defined concession periods. Revenue is secured through long-term Transmission Service Agreements (“TSA”) concluded with the transmission entity. These agreements regulate payment mechanisms, performance standards, asset ownership arrangements, termination compensation, and reversion structures.

The procurement is enabled by section 34 of the Electricity Regulation Act, 2006 (as amended), read with the Ministerial Determination gazetted on 28 March 2025 designating the Department of Electricity and Energy as procurer and NTCSA as the TSA counterparty/buyer.

Crucially, investors rely on enforceable contractual cash flows rather than Eskom’s corporate credit profile. Risk allocation is therefore structured at project level, with defined remedies and predictable revenue streams consistent with international project-finance principles. At the same time, ITP procurement must comply with the Public Finance Management Act 1 of 1999, Treasury Regulation 16 governing public-private partnerships, and section 217 of the Constitution, which requires fair, equitable, transparent, competitive, and cost-effective procurement.

Credit Enhancement and Institutional Bankability

To enhance bankability and mitigate payment and termination risk, government is collaborating with National Treasury and the World Bank to establish a Credit Guarantee Vehicle (CGV). The CGV is structured to provide credit enhancement without direct sovereign guarantees, leveraging development finance, multilateral capital, political-risk insurance, and grant funding to strengthen the credit profile of ITP concessions. This blended-finance mechanism reduces early-stage risk and supports the participation of institutional investors requiring predictable, investment-grade returns.

In effect, South Africa’s transmission financing architecture is shifting from sovereign-supported utility borrowing to concession-based project finance underpinned by targeted credit enhancement.

Outstanding Regulatory Enablers and Residual Risk

Notwithstanding substantial progress, several regulatory instruments critical to full bankability remain outstanding or in development. These include the migration of the transmission licence from Eskom to the new TSO, the finalisation of grid and market codes governing wheeling, congestion management, and loss allocation, the establishment of the TSO revenue and tariff framework underpinning TSA payments, the definitive structuring of asset ownership and reversion arrangements at concession end, and the refinement of dispute resolution mechanisms, step-in rights, and termination compensation frameworks. Recognition of these pending instruments is essential to avoid overstating market readiness; legislative direction is clear, but operational and regulatory completion remains a necessary condition for investment-grade certainty.

Political-economy considerations and state-owned enterprise governance dynamics also remain relevant. The durability of reform will depend on the consistent implementation of structural separation and the insulation of transmission cash flows from generation-related balance-sheet volatility. Contractual ring-fencing, competitive procurement, and multilateral participation provide important mitigants, but execution discipline will ultimately determine investor confidence.

Conclusion: Transmission as a New Infrastructure Asset Class

South Africa’s transmission reform programme therefore represents more than administrative restructuring. It reflects a comprehensive transformation of both governance and financing models. The ERAA provides statutory unbundling and market reform. Presidential confirmation of full TSO independence strengthens policy certainty. Competitive ITP procurement introduces concession-based infrastructure development. The CGV delivers structured credit enhancement aligned with international infrastructure standards.

Collectively, these measures reposition transmission from a balance-sheet-constrained utility function into a project-financed infrastructure asset class. Investment in ITPs is no longer channelled through Eskom’s consolidated borrowing programme but through ring-fenced vehicles supported by enforceable TSAs and structured risk mitigation.

If implemented with regulatory coherence and contractual integrity, South Africa’s Independent Transmission Projects have the potential to transition the grid from a source of systemic constraint into a bankable infrastructure opportunity capable of attracting long-term institutional capital while enabling a competitive, resilient, and increasingly decarbonised electricity market.