Africa’s electricity demand is expected to reach 1,028 TWh by the end of 2025, with many countries embarking on bold reforms across their electricity markets to improve efficiency, attract foreign investment and strengthen power generation, transmission and distribution processes. These reforms mark a shift from a vertically integrated system to a more liberalized wholesale market, creating significant investment opportunities for global financiers and power developers.
vertically integrated structure
According to the African Energy Chamber’s Africa Energy Status 2026 Outlook, most African countries still operate vertically integrated systems, with a single, usually state-owned entity responsible for electricity generation, transmission and distribution. In Zambia, state-owned ZESCO manages the entire chain, while in Ethiopia Ethiopian Power plays a similar role. This centralization allows governments to coordinate large-scale investments while providing investors with a predictable, centralized plan. This also reduces the complexity of negotiating with multiple entities.
This model can be attractive for large-scale projects, as evidenced by recent milestones achieved in Zambia and Ethiopia. These include Ethiopia’s Grand Renaissance Dam, which will be completed in September 2025 and has a planned capacity of more than 5,000 MW. Zambia’s ZESCO also recently completed the Kabwe-Pensuro 330 kV transmission expansion, strengthening the critical northern corridor for mining. However, vertical integration concentrates financial risk. Utilities that are in debt or facing rate shortfalls can impact the nation’s supply security. Vertically integrated systems also have limited transparency and accountability, which impacts investor confidence. Many countries are therefore working to unbundle their electricity markets and pursue more liberalized structures to enhance efficiency.
liberalized market
A shift towards liberalized market structures is being seen across Africa, with countries seeking to encourage more competition by allowing multiple independent actors to participate in electricity generation and distribution. By separating state-owned enterprises, they not only strengthen their operational capabilities and market oversight, but also open up their markets to private enterprise and investment. This will create significant employment opportunities and expand access to energy while fostering economic growth and infrastructure development.
Nigeria has supported regional power trading through independent power producers (IPPs) and the West African Power Pool by unbundling the former power holding company into six generation companies, one transmission company and 11 distribution companies. The reforms will reduce subsidies by about 35% in 2024-25, improving the sector’s profits. In Kenya, IPP participation and sector reforms have increased electricity access from 37% in 2013 to 79% in 2024 through both grid expansion and off-grid solutions. Meanwhile, South Africa is also undergoing unbundling, with Eskom currently being split into three separate entities: generation, transmission and distribution. The South African National Transmission Company is already established, with a more favorable debt structure, greater access to finance and improved creditworthiness. The impact of liberalized structures is thus becoming increasingly evident, and these models lead to improved pricing mechanisms, more targeted subsidies, and ultimately greater energy access for consumers.
wholesale system
Although Africa has been slow to adopt wholesale market structures, we are seeing a notable shift towards these models given their ability to increase competition, lower prices and improve overall quality of service across the power sector. South Africa is the most prominent example of pursuing a wholesale structure on the African continent, with the country set to launch the South African Wholesale Electricity Market (SAWEM) in April 2026. SAWEM, which allows multiple buyers and sellers to trade electricity on a transparent platform, will be introduced in stages, starting with day-ahead, intraday and equilibrium markets, with full market liberalization expected by 2031.
Although SAWEM represents a major shift towards strengthening the domestic electricity market, challenges remain. According to the AEC’s outlook, market norms are not fully developed, raising questions about how markets will operate and be managed in a fair and transparent manner. This highlights the need for enhanced energy planning, high levels of regulatory oversight and financial stability across all market participants. Without these factors, payment risks and grid bottlenecks could undermine investor confidence.
