Southern Africa is breaking energy monopolies

Zambia’s 2024 Open Access Reforms: A Catalyst and Testing Ground for Regional Energy Liberalization

Thu, July 30 2026 /Mpelembe Media/ — The electricity supply industries in Southern Africa are undergoing a major structural shift, transitioning from vertically integrated, state-dominated monopolies toward decentralized and competitive wholesale power markets. This transformation is largely driven by persistent power deficits, climate-induced hydropower shortages, and the soaring energy demands of the region’s mining sectors.

Zambia’s Open Access Regulations A key milestone in this transition is Zambia’s enactment of the Electricity (Open Access) Regulations in July 2024, which legally dismantles the single-buyer monopoly of the state-owned utility, ZESCO. This framework allows independent power producers (IPPs) and large consumers (1 Megawatt and above) to access the national grid and trade electricity directly with one another. However, the operationalization of this market faces significant hurdles, primarily the lack of a standardized pricing methodology for transmission wheeling fees and concerns over fair market access due to ZESCO’s dual role as both a dominant market competitor and the system operator.

SAPP and Transmission Bottlenecks Regional integration is facilitated by the Southern African Power Pool (SAPP), a cooperative grid spanning 12 member countries that has established advanced trading mechanisms, including Day-Ahead, Intra-Day, and Balancing markets. Despite these sophisticated commercial platforms, the region is constrained by a “Capacity Paradox”. Physical transmission networks are severely congested, meaning that high volumes of electricity successfully matched on SAPP’s trading platforms cannot actually be delivered because the physical transfer capacity does not exist. This gridlock prevents the region from fully capitalizing on cross-border energy sharing.

Innovative Financing for Grid Expansion To overcome these physical infrastructure limitations, SAPP and the Southern African Development Community (SADC) launched the Regional Transmission Infrastructure Financing Facility (RTIFF) in March 2024. Managed by Climate Fund Managers, this $1.3 billion target facility utilizes a blended finance model to attract private and public capital to build and upgrade strategic cross-border transmission corridors.

The Rise of Energy Aggregators and Merchant Power Historically, the financial fragility and poor credit-worthiness of many national utilities in the region hindered renewable energy investment, as developers relied heavily on sovereign guarantees. In response, energy aggregators and intermediaries, such as Africa GreenCo, have emerged as a viable solution. These entities act as creditworthy off-takers that pool power from various IPPs and sell it directly to commercial and industrial consumers or trade it on the SAPP markets.

This aggregation model has enabled the financing of non-recourse “merchant power” projects—such as Zambia’s Ilute Solar project and Namibia’s Gerus Solar project—which secure funding without traditional, long-term state-backed power purchase agreements (PPAs). A prime example of this model in action is the ZamWatt initiative in Zambia, a joint venture between ZESCO, Stanbic Bank, and GreenCo designed to aggregate demand and supply renewable energy directly to the industrial and mining sectors.

South African Market Reforms South Africa is also transitioning away from its traditional single-buyer model. The country is preparing for the phased launch of the South African Wholesale Electricity Market (SAWEM), with the first phase anticipated around April 2027. SAWEM will introduce a competitive, decentralized market, enabling traders, IPPs, and municipal buyers to trade power openly, which is driving further demand for energy aggregation and battery storage.

The Great African Unbundling: 5 Surprising Shifts Redefining Southern Africa’s Energy Future

For decades, the energy narrative in Southern Africa was one of systemic stagnation: aging coal fleets, unreliable supply, and the heavy fiscal drag of vertically integrated state monopolies. However, a “silent revolution” is now entering a decisive phase. We are witnessing an structural shift away from legacy single-buyer models toward a liquid, competitive, and multi-buyer marketplace.This transition is not merely a regulatory tweak; it is a fundamental re-engineering of the region’s energy DNA. Based on strategic developments observed between 2024 and 2026, the following five shifts represent the most critical inflection points for capital mobilization and regional energy security.

1. The $34 Billion Optimization Secret: Integration Over Autarky

Metric | Benchmark (Limited Integration) | Realistic Regional Integration | Delta (Regional Savings)
Generation Investment (NPV to 2040) | $154.2 Billion | $117.7 Billion | $36.5 Billion
Transmission Investment (NPV to 2040) | $1.1 Billion | $3.3 Billion | ($2.2 Billion)
Installed Generation (GW) | 143 GW | 130 GW | 13 GW

While regional integration requires a modest $2.2 billion incremental investment in transmission, the trade-off is a massive reduction in redundant generation capital expenditure.”This modelling suggests that ~13 GW less generation capacity would be required if a regional approach is taken… This could save ~$34bn in NPV terms.”

2. The Rise of the “Energy Middleman”: De-risking via Aggregation

The traditional PPA, where an Independent Power Producer (IPP) sells to a single, often distressed state utility, is being supplanted by the “aggregator model.” Intermediaries like Africa GreenCo are the missing link for the bankability of green electrons, shifting the focus from single-project underwriting to portfolio-based risk assessment.The strategic value of this model is evidenced by the  Ilute 25MW Solar PV project  in Zambia. As the first of its kind to rely fully on the SAPP for offtake, Ilute demonstrates how the aggregator model avoids “sovereign contingent liabilities”—in this case, helping the Zambian government avoid a $40 million contingent liability that a ZESCO offtake would have required. Similarly, the  Envusa Energy  deal (a multi-billion rand joint venture between Anglo American and EDF Renewables) highlights how large-scale industrial players are leveraging private platforms to bypass legacy constraints.Why the model is winning:

Default Risk Mitigation:  Aggregators can reallocate energy to the SAPP short-term market if a primary offtaker defaults.

Portfolio Underwriting:  Financiers (such as FMO and BII) are now assessing the credit quality of an entire offtake portfolio rather than a single point of failure.

Flexible Reallocation:  Unlike bilateral PPAs with rigid “deemed payment” clauses, aggregators move energy to where price discovery is most favorable.

3. Zambia’s “Open Access” Paradox: The Pricing Methodology Vacuum

Zambia remains the regional bellwether for market liberalization, but it also serves as a cautionary tale regarding “regulatory lag.” While the Electricity (Open Access) Regulations (SI No. 40 of 2024) were enacted on July 19, 2024, the market faces a “negotiation vacuum” because the Energy Regulation Board (ERB) has yet to implement a standardized  pricing methodology .Without a clear fee structure for grid use, participants are forced into opaque bargaining with the dominant utility, ZESCO. Investors must watch a critical deadline: the system operator has  180 days from July 19, 2024 (mid-January 2025)  to submit system operation guidelines to the ERB. Until then, entry remains a high-barrier exercise requiring:

Form I Applications  and detailed Infrastructure Statements.

Financial Declarations:  A significant hurdle for under-capitalized local entrants.

Volume Data:  Precise metrics on intended transmission loads.

4. Transmission: The 14,000 km Physical Bottleneck

Regulatory liberalization is currently outstripping physical reality. Across the SAPP, a significant volume of matched trades on competitive platforms fail to execute because  physical transfer capacity (PTC)  is unavailable.In South Africa, the Independent Transmission Programme (ITP) has emerged as the vital vehicle to enable private participation in grid expansion. The scale is daunting: a 14,000 km expansion by 2032 at an estimated cost of  R440 billion . For strategic planners, the takeaway is absolute: the  location of generation —and its proximity to uncongested nodes—is now as commercially decisive as the technology of the asset itself.

5. From Baseload to “Shaped” Demand: Electricity as a Differentiated Commodity

Electricity is no longer a generic utility product; it has become a time-sensitive, differentiated commodity. Market demand is pivoting from “cheapest energy” to “firmed, dispatchable renewable energy.”This shift makes Battery Energy Storage Systems (BESS) a commercial necessity rather than a technical preference. Because the grid is congested, the ability to “shape” and “firm” power allows generators to capture maximum value during the specific windows when physical transfer capacity is actually available. We are moving toward a system where the most attractive assets are those that connect the right electrons to the right customers at the right time.”The region is moving from a model dominated by bilateral PPAs… towards a system in which electricity is increasingly bought, sold, balanced and optimized through competitive markets.”

Conclusion: The Sprint Towards 2027

The momentum behind this unbundling is now backed by significant multilateral weight. In November 2025, the World Bank approved the  $12 million RETRADE SAPP project , a strategic catalyst designed to “crowd in” private capital and deepen market liquidity. This serves as a vital bridge to the  April 2027 launch of the South African Wholesale Electricity Market (SAWEM) .SAWEM will likely be the definitive milestone for regional price discovery, provided that the “energy middlemen” can provide the necessary liquidity. As we approach 2027, a fundamental question remains for the region’s legacy utilities: can they adapt fast enough to survive as efficient “grid providers,” or will they be sidelined by the very competitive market platforms they once sought to control? The transition from vertically integrated products to competitive market platforms is no longer a forecast—it is the new baseline.