Unbundling and Re-Merging: Drivers, Outcomes, and Challenges across Africa
Unbundling and Re-Merging: Drivers, Outcomes, and Challenges across Africa
Francis
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JOHANNESBURG — A sweeping wave of structural upheaval is redefining Africa’s power landscape as 2026 marks a critical inflection point for the continent’s energy giants. From the legal unbundling of South Africa’s Eskom to the tentative "re-merging" of regulatory oversight in West African hubs, the tug-of-war between centralized control and market liberalization is entering its most volatile phase.
The primary driver behind this era of "unbundling"—the process of breaking vertically integrated monopolies into separate generation, transmission, and distribution entities—remains a desperate search for efficiency. Decades of "failure to deliver" by state-owned enterprises have forced governments to seek private sector involvement to bridge massive infrastructure gaps. In South Africa, this transition culminated in the launch of the South African Wholesale Electricity Market (SAWEM) in March 2026, aimed at dismantling Eskom’s century-long monopoly.
However, the outcomes of these reforms have been starkly mixed. While South Africa has successfully registered the National Transmission Company South Africa (NTCSA) to ensure open grid access, Nigeria’s decade-old unbundling continues to struggle with "liquidity bottlenecks". Despite generating a record 10,304 GWh in early 2025, Nigerian distribution companies (Discos) remain hampered by a 53% metering gap and legacy debts totaling 4 trillion naira.
A surprising counter-trend of "re-merging" or reinforced centralization is also taking root. As of April 2026, the Nigerian Independent System Operator (NISO) has highlighted the need for "stronger coordination" between power and gas sectors to prevent system collapses, effectively pulling disparate private actors back under a central regulatory umbrella to manage gas supply crises.
The challenges of unbundling are most evident in the regional disparity of grid stability. While Nigeria celebrated the trial synchronization of its grid with the West African Power Pool in November 2025, it still faces monthly losses of 8 billion naira due to "grid inefficiencies". This duality—regional integration versus domestic decay—highlights the complexity of managing decentralized systems.
In East Africa, Kenya is navigating a different set of unbundling hurdles. After an eight-year freeze on new power purchase agreements (PPAs) ended in 2023, the government has struggled to balance its unbundled structure with the need for urgent generation growth. The Ministry of Energy has declared 2026 a "pivotal year" to restart local production and reduce reliance on imports from Ethiopia and Uganda.
Investor confidence remains the ultimate benchmark for success in these reforms. South Africa’s unbundling has successfully attracted over R50 billion in renewable energy pledges as of April 2026, targeting 105 GW of new capacity by 2039. Proponents argue that without unbundling, such private capital would remain locked out of the coal-heavy national grid.
Conversely, the lack of "cost-reflective tariffs" remains a primary barrier across the continent. Nigeria’s outstanding subsidy payment reached 536.4 billion naira in early 2025, a 14% quarterly increase that creates a "significant strain" on government finances.
This financial bleeding often forces governments to reconsider re-merging assets to simplify subsidy management.
Technological advancements are also driving the unbundling agenda. The rise of captive power projects, which now fuel 16% of Kenya’s electricity, allows industries to bypass the national grid entirely. This "bottom-up unbundling" forces state utilities to modernize or risk losing their most profitable commercial customers.
The African Energy Chamber’s 2026 Outlook Report warns that "isolated solutions" will no longer suffice. The report emphasizes that for unbundling to work, it must be paired with regional trade networks like the African Continental Free Trade Area (AfCFTA) to mitigate global economic shocks.
As countries like Zambia and Ghana watch these experiments, the lesson of 2026 is clear: unbundling is not a panacea. Successful outcomes depend less on the act of breaking up monopolies and more on the regulatory clarity and financial transparency that follow.
Looking ahead, the continent’s energy future will likely be a hybrid. While unbundling will continue to invite renewables and fintech innovators, strategic "re-merging" of grid operations and regional power pools will be necessary to ensure that the lights stay on from Cape Town to Cairo.
