SOUTH AFRICA: Technical Support to Department of Public Enterprises on SOE Reform and Restructuring Plans for Eskom and Transnet

In South Africa, PPIAF is supporting reforms for state-owned enterprises (SOEs) that addresses critical issues in both the energy and transport sectors.  Eskom, the country’s power utility’s financial instability, compounded by a legacy debt of $30 billion guaranteed by the government, poses significant risks to the nation’s credit rating. To mitigate these risks and improve operational efficiency, the government has proposed reforms aimed at increasing private sector involvement.

Our support includes advising on the optimal structure to meet energy security and climate goals and evaluating Eskom’s financial and operational performance to recommend improvements. This involves reviewing existing policies, identifying areas for further reform, and exploring innovative financing mechanisms for the transmission network. The goal is to ensure that Eskom can meet its financing obligations and contribute effectively to the country’s energy needs.

In the transport sector, Transnet, which handles about 90% of South Africa’s exports and imports, faces inefficiencies and high costs that undermine economic competitiveness. The port system suffers from uniform tariffs and a lack of cross-subsidization, while the rail network’s low freight transport share is below global averages. Our intervention focuses on reviewing Transnet’s strategic plans to increase port capacity and modernize infrastructure. This includes improving commercial performance at container terminals through private sector expertise and assessing the feasibility of involving private operators in inland rail-based container terminals. These efforts aim to empower the Department of Public Enterprises (DPE) to effectively lead the reforms for Eskom and Transnet, ensuring improved financial sustainability and operational efficiency for South Africa’s SOEs.