Market and regulatory unbundling in South Africa: Lessons from telecommunications for the electricity sector's energy transition

South Africa’s history of vertically integrated monopolies provides a unique opportunity to examine the outcomes of market liberalisation in a developing economy context. The paper's central goal is to analyse the design and implementation of unbundling, the separation of competitive services from monopoly infrastructure, in both sectors. By juxtaposing the limited success of Local Loop Unbundling (LLU) in telecoms against the emerging reforms under the

Electricity Regulation Amendment Act (ERAA) of 2024, the study aims to identify the institutional and regulatory prerequisites for successful market creation, infrastructure investment, and equitable cost allocation.

The qualitative comparative case study analyses primary legislative documents, regulatory frameworks, incumbent submissions, and policy evaluations. It examines the telecommunications reform trajectory from the 1990s, focusing on the policy intent versus the implemented reality of LLU. This is contrasted with the structural provisions of the ERAA, which mandates the legal unbundling of Eskom and establishes a new market design centred on an independent Transmission System Operator (TSO) and a competitive wholesale market.

The analysis reveals a divergence in approach and preliminary outcomes. In telecommunications, the service-based competition model of LLU failed due to protracted regulatory uncertainty, strong incumbent resistance, and a critical misalignment of incentives for network investment, particularly in rural areas. Consequently, fixed-line infrastructure stagnated.

In contrast, electricity reforms adopt a hybrid structural model. The ERAA proactively separates the natural monopoly (transmission/grid operations) from competitive generation and creates dedicated mechanisms like the Independent Transmission Projects (ITP) Programme to finance new grid infrastructure through public-private partnerships with transparent cost recovery. The paper concludes that three key lessons from telecoms are vital for electricity.

The electricity sector’s institutional design appears to incorporate these lessons, but its ultimate success hinges on the competent and apolitical execution by the new market institutions.