South Africa’s electricity market is evolving rapidly, shaped by a convergence of policy shifts, technological advances and growing global trade requirements. Yet, a persistent challenge is understanding the role of electricity traders within the energy market – what they do, why they exist and how they underpin both investment and competitiveness in the electricity sector, electricity trader Apollo Africa CEO Nico de Bruyn writes.

The legal and policy foundations for a competitive South African energy market have been in place for decades, from the 1998 White Paper on Energy Policy, which explicitly called for retail competition and multiple suppliers, to the 2019 Roadmap for a Reformed Electricity Supply Industry, which mapped out unbundling, open access and trader participation. The Electricity Regulation Amendment Act, effective from January 2025, cemented this vision into law.

Yet despite this long-standing policy trajectory, traders are still widely misunderstood. Far from being opportunistic newcomers, they are an essential component of the modern electricity ecosystem, designed to unlock investment, broaden market participation and keep South African businesses competitive in a carbon-conscious global economy.

WHY TRADERS ARE ESSENTIAL FOR IPPS AND ENERGY USERS
For independent power producers (IPPs), the road to financial close (FC) is long and complex. They must secure land rights, environmental permits, equipment suppliers, construction contractors, operating agreements, and most importantly, a bankable offtake contract. Only when all of this is in place will lenders release funds to begin construction, which can take 18 to 24 months depending on the technology.

Most IPPs do not want (and aren’t structured) to negotiate dozens of smaller offtake deals. They seek one large, creditworthy buyer. Traders like Apollo Africa fulfil this role, contracting with the IPP for the full or a material portion of the offtake, and then breaking that energy into smaller portions to sell to multiple customers, who ordinarily would not have had access to supply from an IPP. This model de-risks the project for the IPP while enabling access to customers.

For large power users, who are not willing or are unable to leverage their balance sheets to post the guarantees required to secure PPAs, traders provide an entry point into an affordable renewable energy market. Without traders, many businesses ranging from mines to manufacturing plants would be forced to either remain on default supply or face closure due to increased cost of energy. Furthermore, traders can aggregate supply from multiple IPPs over diverse technologies and geographies to create a unique profile to match customers specific requirements.

For IPPs, traders provide a mechanism to contract with a single creditworthy counterparty that can carry the required credit support while still allowing multiple end-users to access the energy. The trader steps in as the structured off-taker, adding liquidity to the transaction, enabling the project to reach financial close faster and with significantly lower risk.

Remember, projects don’t stall simply because the “perfect” single-buyer customer can’t be found. Instead, through traders, supply can reach the market, allowing customers that would ordinarily have been excluded to gain access to renewable energy supply that would otherwise be out of reach.

INVESTMENT, AFFORDABILITY AND MARKET FLEXIBILITY
South Africa’s evolving electricity market requires a mix of flexibility, innovation, and structured commercial models to meet demand and accelerate private sector participation. Traders provide this by serving as a bridge between generation and consumption, offering customers access to tailored procurement structures that are increasingly necessary in a volatile operating environment.

Through trader-led models, customers gain the ability to secure energy under variable contract tenures with controlled escalation (i.e. CPI-linked increases or fixed annual adjustments) rather than being fully exposed to unpredictable price movements.

For energy-intensive users fighting to protect operating margins, stability matters as much as price. Traders can design energy procurement solutions that align with load profiles, risk appetite, contract length requirements, and budget constraints. They also create optionality, allowing businesses to diversify their supply between technologies, geographies and suppliers rather than rely on a single rigid procurement outcome.

This combination of flexibility, competition, and contract innovation contributes directly to affordability over time, risk reduction and flexibility, strengthening market resilience.

INTRODUCING SAWEM: THE SOUTH AFRICAN WHOLESALE ENERGY MARKET IS COMING
The creation of the South African Wholesale Electricity Market (SAWEM) further amplifies the role of traders in the market.

In many mature global electricity systems, wholesale markets run on active supply and demand dynamics, where prices shift in response to real conditions. SAWEM is expected to introduce a version of this approach over time in South Africa, with the National Transmission Company of South Africa (NTCSA) being placed at the centre of dispatch and market coordination.

At the heart of SAWEM will be the day-ahead market, where generators indicate how much electricity they can supply for the next day, and at what price. On the other side, buyers indicate how much electricity they expect to use and what they are willing to pay. The market then clears through a process where the system operator accepts the cheapest available supply first and stacks it upward until demand is met. This is often referred to as the merit order.

Renewables fundamentally change the pricing dynamics in such a market. Solar and wind projects have near-zero marginal cost (once built, they don’t require fuel inputs like coal, diesel, or gas). When they post energy into a market, they are typically able to offer large volumes at very low cost. In a merit-order system, this means renewables are often dispatched first.

But the market also reveals where electricity becomes expensive. Peak demand periods, particularly in the evening, require generation that can respond instantly. That often comes from peaking plants that use costly fuels like diesel or gas. When those plants set the marginal price, the market-clearing cost rises sharply.

That means under SAWEM, when supply is abundant and demand is low, prices reduce, and conversely, when demand is high and supply low, prices rise.

It is expected that the launch of Phase 1 of the market will be on June 1, which will mark a major milestone in South Africa’s energy reform journey.

WHY SAWEM INCREASES THE IMPORTANCE OF TRADERS
Wholesale markets increase transparency, but they also introduce volatility. For large power users, this creates a strategic choice to either participate directly in the market and accept the risk of hourly price movements, or hedge part of that exposure through longer-term contracts.

For example, a large mine or petrochemical player might choose to procure some electricity through SAWEM, but it would be commercially risky to expose 100% of demand to the daily price curve. Prices can spike if a major plant trips, if demand surges unexpectedly, or if costly peaking generation must be dispatched.

This is why layered procurement becomes essential. The most resilient model is often a blended approach where a customer locks in a majority of supply under a long-term agreement (through an IPP or a trader), and leaves a smaller portion exposed to the wholesale market to manage operational flexibility. This is where traders step in and provide the customer with a blended supply solution between longer-term contracts and market trades.

Traders add liquidity to the market by enabling more transactions, more participants, and more flexibility in how supply and demand are matched. In a future market environment like SAWEM, liquidity is the bedrock of the market.

A COMPETITIVE, SUSTAINABLE FUTURE
South Africa’s electricity reform journey depends on solutions that are commercially workable, investable and inclusive. Traders enable precisely that. They accelerate financial close for IPPs, unlock projects that would otherwise stall and widen access to renewable energy for businesses that would otherwise not have had access to it.

As SAWEM comes online and the market becomes more dynamic, traders will feature more prominently as they help customers manage volatility, structure hedging, and participate in the energy transition.

Traders are not a disruption, they are foundational to a modern electricity market, enabling competition, credible counterparties, and the flexibility required to unlock long-term investment.

Without traders, the energy transition stalls, capital hesitates and South African industry falls behind its peers globally. With them, the sector evolves into a diversified and resilient energy market where choice and innovation drive growth.

*De Bruyn is the CEO of Apollo Africa, a licensed electricity trader backed by the Reunert Group. He has more than 20 years of leadership experience within Reunert and nearly a decade working across South Africa’s renewable energy and private power market.