For the third quarter ending in December, Nersa’s financial performance was below budget.
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The Department of Electricity and Energy is engaging with National Treasury regarding budget allocation cuts to critical Schedule 3 entities, including the National Energy Regulator of South Africa (Nersa), which requires additional funding following the expanded mandate under the Electricity Regulation Act (ERA).
The ERA gives Nersa oversight of new electricity market structures, surveillance mechanisms, increased licensing requirements, and broader regulatory responsibilities. As a result, the regulator must invest in ICT systems, data analytics, cybersecurity, and automation processes to meet these obligations.
For the third quarter ending in December, Nersa’s financial performance was below budget, largely because the petroleum pipelines business did not meet its revenue targets.
The shortfall was attributed to reduced volumes caused by lower market demand, limited production at Natref, and export delays.
Savings and expenditure were mainly driven by understatement in employment costs due to unfilled vacancies, while the deficit was also influenced by operational costs exceeding revenue.
Despite these pressures, Nersa remains solvent, with assets exceeding liabilities. Liquidity remains stable with adequate cash balances, although the downward trend in net asset value signals a need to strengthen reserves to ensure long-term sustainability.
Kubeshnie Bhungwandin, Deputy Director-General in the Department of Electricity and Energy, said geopolitical developments could further impact Nersa’s revenue from the petroleum pipelines sector and therefore require closer attention.
Bhungwandin said it might be necessary in the coming weeks for Nersa to appear before Parliament to report on its financial position so that early interventions can be considered.
She said Nersa’s operational performance remained strong, with the regulator achieving 99% of its performance targets.
The missed target related to Programme 1: Regulatory Service Delivery, specifically four compliance audits that were not completed because they depend on responses from licensees.
“But overall we need to have a discussion around Nersa on how we strengthen its reserves and sustainability, because it is essentially a Schedule 3 entity dependent on National Treasury for MTEF allocations, which are also being cut,” Bhungwandin said.
She added that Nersa’s revenue model may need to change to support its expanded regulatory mandate.
“Licensing fees would likely need to increase to accommodate the ERA, the opening of new electricity markets and the additional obligations placed on Nersa. Somebody has to pay. If the consumer does not pay, it will have to come from National Treasury. And if there is no money, it becomes part of the discussion the Department of Electricity and Energy is having with National Treasury about the impact of budget cuts on state-owned entities and their obligations,” she said.
Regarding operational performance in the quarter, Bhungwandin said Nersa had also established an Electricity Advisory Forum, which will assist with matters related to the electricity market platform expected to launch this year.
The advisory forum’s role is to facilitate competition in the electricity market, ensure fair and efficient participation, and monitor compliance with the market code on behalf of the regulator.
During the quarter, the entity also approved 17 electricity trading licences, while its regulatory and policy advocacy unit provided comments on the first transmission project proposals.
Bhungwandin added that the performance of Schedule 3 entities, as well as the South African Nuclear Energy Corporation (Necsa), had also been affected by budget cuts that constrained operational stability, maintenance, infrastructure upgrades, and project implementation.
“This is placing increased reliance on internal revenue streams and borrowing to sustain operations, resulting in reduced capacity to meet strategic and developmental mandates,” she said.
“The department is engaging National Treasury to highlight the negative impact budget cuts have on state-owned entities, the risks to service delivery, and national priorities.”
Necsa achieved 73% of its performance targets, with underperformance mainly linked to Calchem and the Nuclear Technology Products (NTP) group, which failed to meet their targets.
The Nuclear Technology Products (NTP) division convened a sustainability task team in January aimed at containing costs and generating additional revenue.
Overall targets were missed due to declining pharmaceutical sales and reduced net profit at Pelchem, which was affected by a plant failure in July 2025 that reduced production, as well as a 30% tariff increase from the United States and broader geopolitical pressures.
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