Minister of Electricity and Energy Kgosientsho Ramokgopa plans to submit proposals to cabinet, following consultations with Finance Minister Enoch Godongwana, seeking to exempt Eskom from the Public Finance Management Act (PFMA) to help the state-owned utility compete against private sector generators in South Africa’s evolving energy market.
Why Minister Ramokgopa Wants to “Liberate” Eskom from the PFMA
Minister Kgosientsho Ramokgopa argued at a recent Unisa School of Business Leadership event that Eskom is hamstrung by the PFMA when facing off against independent power producers and trading on the South African Wholesale Energy Market (Sawem). According to the minister, the utility lacks the commercial flexibility of private competitors and cannot act fast enough to seize market opportunities. “I can make the case, and I believe the case is compelling,” Ramokgopa stated regarding his upcoming cabinet submission.
Khaya Sithole, a chartered accountant and director at Corusca Consulting, noted that Ramokgopa’s reasoning closely echoes the arguments made by Vuyani Jarana when he resigned as CEO of South African Airways (SAA) in 2019. Jarana previously likened SAA to a racehorse with its hind legs tied up. Sithole explains that while the PFMA is designed to maintain discipline and prevent chaos in public procurement, its rigid and standardized rules can paralyze an enterprise in a competitive commercial environment.
Legal Realities and the Push for Procurement Reforms
Industry analysts question whether a total exemption from the public finance framework is legally feasible or practical. Peter Attard Montalto, managing director at Krutham, questioned the legal viability of the proposals and emphasized that National Treasury will ultimately refuse to surrender oversight of state entities. However, Attard Montalto acknowledged that justifiable procurement reforms are necessary to streamline approvals through the Office of the Chief Procurement Officer, which currently suffers from a lack of capacity and strategic intent.
Rather than a blanket waiver, experts suggest a targeted approach. Sithole argues that Ramokgopa must specify exact sections of the PFMA for exemption to maintain proper oversight while granting operational agility, noting that “it can only be a carve-out.” Anton Eberhard, an emeritus professor at the University of Cape Town Graduate School of Business’s Power Futures Lab, pointed out precedent for this, noting that Eskom previously received narrow PFMA exemptions to negotiate directly with original equipment manufacturers.
Market Advantage and Future Structure of the Power Sector
Disagreements persist over which market participants actually hold the competitive advantage. While Ramokgopa views Eskom as disadvantaged by state regulations, Professor Eberhard counters that Eskom still retains roughly 70% of generation capacity, placing private sector competitors at the actual disadvantage. Eberhard added that the minister’s strategy seems to underestimate the depth of structural reforms required in the national power grid.
Furthermore, Eberhard advocates splitting Eskom’s generation business into competing corporatised units that could eventually incorporate private equity. Any uncompetitive conduct by the utility will face immediate scrutiny, according to Attard Montalto, who notes that Eskom’s new renewable energy venture, Eskom Green, will serve as the ultimate testing ground and will likely face court challenges if anti-competitive behavior occurs.
Controversy Over Social Obligations in the Private Sector
Ramokgopa’s proposal also seeks to impose the same social obligations carried by Eskom onto private sector electricity operators, including those bound by bilateral contracts. Analysts caution that this approach misunderstands private operations. Attard Montalto stated that private energy entities already invest heavily in social initiatives as part of their social license to operate, calling the minister’s plan a government attempt to claim all developmental roles while losing focus on delivering the cheapest power for economic growth.
Deon Conradie, an electricity pricing expert, warned that saddling the broader electricity supply industry with social objectives without direct fiscus compensation will drive up tariffs, hurt consumer affordability, and damage national economic competitiveness. Eberhard suggests that funding social packages via transparent cross-subsidies on transmission charges or through direct fiscal grants—such as those used for Free Basic Electricity—remains a more sustainable mechanism.
Frequently Asked Questions
What is the Public Finance Management Act (PFMA)?
The PFMA is an instrument to install discipline and prevent chaos in public procurement and resource management, providing standardised rules and giving guidance.
Why does Minister Ramokgopa want to exempt Eskom from the PFMA?
According to the minister, strict PFMA rules restrict Eskom’s speed and commercial flexibility, putting the utility at a disadvantage when competing against agile private sector players and on the South African Wholesale Energy Market (Sawem).
Do experts support a complete exemption from the PFMA?
No. Analysts like Khaya Sithole and Peter Attard Montalto argue that National Treasury will maintain oversight, suggesting that only targeted legislative carve-outs for specific procurement hurdles are feasible.
Who holds the larger share of South Africa’s electricity generation market?
According to Professor Anton Eberhard, Eskom still holds about 70% of the market in generation.
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