Why transmission investment is the missing piece in South Africa’s energy transition

South Africa has outgrown its grid.

The transmission network we built for a centralised, coal-based power system can’t carry the country into a decentralised, renewables-led future.

The result is familiar: good projects are stranded in the Northern, Western and Eastern Cape; capital is waiting on the sidelines and our economy is still exposed to the risk of load-shedding.

Globally, generation has raced ahead of transmission. South Africa is no exception. If we want the Just Energy Transition (JET) to be more than a plan on paper, we must start with the physical wires. 

The specifics are stark.

Over the past decade, only about 4,300 km of new lines were built against an estimated requirement of roughly 14,000 km in the next ten years.

Most of the country’s best wind and solar resources sit on the periphery, far from the big load centres in Gauteng and KwaZulu-Natal.

Meanwhile, the coal fleet is ageing as maintenance costs climb, spares become harder to source and reliability declines. New generation alone won’t fix that. Without transmission, additional megawatts are moot. 

Globally, the lag between renewable generation capacity and transmission infrastructure has emerged as a major bottleneck in the energy transition.

South Africa is not unique in this predicament. Countries around the world are grappling with similar challenges as they accelerate their transition towards renewable energy sources. Without significant investment in transmission infrastructure, renewable generation capacity remains stranded, limiting its ability to effectively contribute to the grid. 

The point is simple: no grid, no transition.

Transmission is not a supporting actor. It is the critical path.

Until we unlock investment into backbone lines and deep connections, we will continue to ration growth and slow the pace of decarbonisation.

The upside is equally clear, a stronger and smarter grid unlocks more private capital into generation, enables competition and wheeling, as well as lowers long-run costs for business and consumers. 

Where will the money come from? 

Not from the fiscus alone.

The scale - in the order of hundreds of billions of rands - demands a financing model that mobilises private capital at pace and at scale.

The amount of investment required for South Africa is immense, estimated at approximately R440 billion over the next decade.

Given the price tag, this infrastructure will require a significant amount of financing in the form of long-dated infrastructure debt such as project finance loans. 

Such debt instruments play an important role in that they allow projects to repay large capital outlays over an extended period, of up to 20 years or more, assisting greatly in easing the burden on the economy and consumers, as the cost is effectively spread over a long time. 

Policy must perform too. Adhering to a procurement process that is transparent, standardised and predictable, will attract serious bidders and lower the cost of capital. Pair this with faster land access and servitudes, time-bound permitting and clear curtailment rules, and the risk becomes financeable at scale.

What does this mean for prices?  

Over time, system costs fall because of higher transparency, competitive public procurement programmes and better utilisation of high-capacity corridors, resulting in cheaper delivered energy.

That is exactly what mature markets have experienced after opening access and investing in the grid. 

South Africa is not starting from zero.

The unbundling of the National Transmission Company of South Africa (NTCSA) clarifies roles; NERSA remains custodian of codes and market conduct.

Private developers are already funding transmission infrastructure under self-build arrangements. And the capital base is here: domestic lenders, development financiers, institutional investors and infrastructure debt funds with deep experience in project-financed assets. 

Experience matters. Since Bid Window 1, our teams have financed more than 3 GW of renewable generation and in 2024 alone helped avoid 9.27 million tCO₂e. That track record is not a vanity metric; it’s a capability signal. It means we understand the South African power market’s evolution towards an open, competitive wholesale model.

The opportunity is bigger than “keeping the lights on”. A programme of well-structured transmission investment would unlock a multi-gigawatt pipeline of private generation, stabilise prices for industry, create high-quality jobs across engineering, manufacturing and construction and anchor South Africa’s JET in real assets that deliver inclusive growth.  

The call to action is simple, we need to prioritise the grid, launch public procurement programmes for transmission infrastructure on bankable terms and realign tariffs to be cost-reflective.

We also need to focus on accelerating land and permitting as well as mobilise long-term financing such as infrastructure debt.

If we do this, we turn a constraint into a catalyst. Transmission becomes the backbone of a modern energy economy. Build the grid, and everything else will follow. 

Rolf Canto (Head) and Kabelo Mabaso (Investment Analyst) are from Infrastructure Debt at Old Mutual Alternative Investments (OMAI).

BUSINESS REPORT