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S.African Ramaphosa pushes Eskom breakup plan ahead

South Africa will continue to break up the power utility 'Eskom' and create a separate company that would run the transmission grid. This is a major reform being closely monitored by international investors.

Eskom, the state-owned company that owns Africa's largest industrialised economy, has been plagued by rolling blackouts for years as it struggles to maintain its aging plants and finances. The company will be split to attract private investment and create a modern, reliable electric system. The transmission of power is one of biggest obstacles to economic growth and new electricity supply.

In his national address, Ramaphosa announced plans to create "a fully-independent state-owned transmission company" that would?own and manage grid assets as well as the electricity market.

He appointed a task force under the National Energy Crisis Committee to oversee restructuring. The team was required to deliver a detailed report with timelines for implementation within three months.

INVESTMENT KEYS

Ramaphosa’s announcement follows an update by Electricity Minister Kgosientsho Ramokgopa, in December. This proposed that?transmission assets be kept as an Eskom subsidiary.

Busisiwe Mavuso CEO of Business Leadership South Africa said: "This issue has caused serious concern as international investors and local leaders are beginning to question the commitment of the government to the reform program."

Olga Constantatos said that the unbundling of Eskom is intended to stimulate competition and private investment after decades under monopolistic control. Private investment in renewables mobilised over 200 billion rand (12,5 billion dollars) and added more than 6,000 megawatts of capacity without impacting Eskom's financials.

According to a presentation by the Department of Electricity and Energy, South Africa will need 390 billion rands over the next 10 years for transmission infrastructure. Eskom is unable to provide this funding due to its financial constraints.

IMF Urges FASTER ELECTRICITY RENEWAL

In its Article IV report, The International Monetary Fund called on South Africa to accelerate electricity reforms. This included separating Eskom’s generation and transmission units, creating a wholesale market and supporting private projects for transmission through risk-sharing tools, such as the forthcoming credit guarantee vehicle supported by the International Finance Corporation.

IMF has also highlighted Eskom's poor debt servicing capacity and rapidly rising public debt levels.

(source: Reuters)