A US$1.3 billion energy fund to build high-voltage transmission lines across Southern Africa marks yet another critical step towards strengthening the continent’s energy trading markets. The fund was launched in 2024 by the Southern African Power Pool (SAPP) and Climate Fund Managers, a global blended-finance climate fund manager. Its goal is to boost regional interconnectivity and energy security by facilitating efficient electricity trade among the 12 member countries.

SAPP executive director Stephen Dihwa says transmission networks need to be developed so that Southern African Development Community (SADC) communities can access renewable energy projects and, subsequently, improve energy trading between countries. ‘There are willing buyers and sellers of electricity, but they cannot move the energy they want,’ he told Reuters. ‘There has been so much blockage of energy which would be traded. The grid, therefore, becomes critical to move electricity generated from renewable energy projects in different countries.’

While electricity lies at the heart of Africa’s energy trading markets, energy trading also involves products such as crude oil, natural gas, coal and increasingly renewable energy – through international renewable energy certificates (I-RECs). The Johannesburg Stock Exchange (JSE) launched the continent’s first voluntary carbon market in late 2023, as a centralised regional marketplace which enables market participants to buy and sell I-RECs and carbon credits.

‘Carbon and renewable energy credits can be used in compliance programmes, including the carbon tax, as well as in voluntary programmes to support company net zero commitments,’ said the JSE of its Ventures Voluntary Carbon Market, announcing that it had facilitated its first trades of carbon credits in February 2025. ‘We expect this to be the first step in developing robust markets for carbon credits and I-RECs, which will enable South African companies to accelerate their net-zero programmes and meet compliance requirements,’ it said.

Traditionally, Africa’s energy trade has been based on bilateral long-term agreements between neighbouring countries, which are now being liberalised through more private-sector participation. Among the bilateral deals, there is, for example, Zambia and Zimbabwe’s sharing of hydropower generated from the Kariba dam on the Zambezi river. Meanwhile,South Africa’s state-owned utility Eskom has a bilateral agreement with Mozambique’s power utility to import more than 1 150 MW of electricity generated from the Cahora Bassa hydroelectric dam. However, according to Bloomberg, Mozambique is planning to end the 50-year deal and repatriate the plant for its own use, which would threaten South Africa’s power supply.

This highlights why governments are often concerned about being energy-dependent on other countries. But many have recently started to realise the mutual benefits that a robust cross-border electricity market offers, with regional power pools creating more competitive markets. These tend to ensure a more reliable power supply while driving down costs and attracting foreign investment. ‘Power pools are a gamechanger for Africa’s energy sector,’ says Liz Hart, MD of the Africa Energy Indaba. ‘By enabling cross-border electricity trading, they help balance supply and demand, reduce reliance on costly fossil fuels and improve grid stability. Through regional collaboration, we can accelerate access to affordable and sustainable energy for millions across the continent.’

The continent’s largest and most established power pool is SAPP, which covers South Africa, Mozambique, Zambia and other SADC countries. It celebrated its 30-year anniversary in March 2025. SAPP has been instrumental in integrating renewable energy sources and improving energy access across the region while addressing South Africa’s energy challenges. One of its primary benefits is providing support during energy emergencies, so that member countries can rely on their neighbours for additional power supply during unexpected shortages or outages.

In other regions of Africa, there are the Eastern Africa Power Pool (EAPP), whose members include Kenya, Ethiopia and Uganda; the West African Power Pool (WAPP), including Nigeria, Ghana, Côte d’Ivoire; and the Central African Power Pool (CAPP), with the DRC, Cameroon and Gabon, among others, as members. In North Africa, the francophone Maghreb Electricity Committee (Comelec) incorporates members such as Algeria, Morocco and Tunisia.

Recognising the strength of interconnected electricity markets, the African Union (AU) has taken steps to establish a continent-wide power system – the Africa Single Electricity Market (AfSEM) – which will serve 1.3 billion people across 55 countries. Geographically, AfSEM will be one of the world’s largest electricity markets. Work is under way to develop a continental power system masterplan (CMP) that will create the framework conditions allowing countries to trade electricity. It’s designed to provide a strategic roadmap for connecting Africa’s five power pools (CAPP, Comelec, EAPP, SAPP and WAPP).

The idea is to leverage national and regional surpluses and deficits through cross-border power exchanges and inter-power pool trade. At the 2024 AU Summit, African heads of state officially endorsed the CMP as their AU Agenda 2063 Flagship Project. In January 2025, phase 3 of the CMP was officially launched at the AU Energy Summit in Senegal. At the gathering, the South African government promised to include the focus on regional power pools in its G20 Agenda. The country is using its status as host of the G20 in November to advocate for pan-African energy solutions, encouraging broader co-operation on energy access across the continent – where more than 600 million people are still without access to electricity.

In line with these efforts, the World Bank has approved an investor programme in West Africa to bolster regional power system integration, enhance energy security and advance the transition to a more affordable, sustainable, and lower carbon power sector.

The US$1.6 billion West Africa Regional Electricity Market programme (WA-REMP) is set to address crucial electricity needs for households, industries and medium-sized companies, as well as regional and national power sector institutions. ‘This initiative builds on the well-established foundation of the West African Power Pool and its vital regional interconnectors, and strengthens the regional market and regulatory institutions to remove the remaining barriers to a fully functional regional power market,’ said Franz Drees-Gross, the World Bank’s regional infrastructure director for West and Central Africa. ‘It also aligns with our Mission 300 ambition to provide electricity access to 300 million people in sub-Saharan Africa by 2030.’

WA-REMP will help implement the WAPP’s Ghana-Côte d’Ivoire interconnection project to enhance power transmission capabilities and facilitate electricity trade between the two countries. It will also support the Mauritania Transmission Corridor Project to reinforce the national grid and develop the country’s renewable energy capacity and private-sector investment, while still enabling electricity exports to other WAPP members.

Further south, significant change is unfolding in South Africa. After years of load shedding and energy woes, the country is liberalising its power sector.

The unbundling of Eskom’s transmissions business and the creation of the National Transmission Company of South Africa (NTCSA) have opened the power grid to more participants, making it more competitive and hopefully also more stable. The NTCSA is considered key to the transition to a multi-market model that will enable businesses and municipalities to buy directly from independent power producers (IPPs), instead of Eskom.

PwC’s 2024 Africa Energy Review notes that the rise of a secondary market, with the buying and selling of IPPs, signals a maturing market where assets are increasingly traded. ‘This trend is expected to continue as more projects reach operational stages and invest-ors look to exit. Concurrently, entities are consolidating, particularly those that used special purpose vehicles to hold individual projects,’ says the report. ‘We see a shift towards commercial and industrial projects, with banks funding companies directly rather than individual projects.’

The emergence of aggregators and, eventually, traders will change the market landscape, with significant supply and demand necessitating a central clearing house, according to PwC. Internationally, real-time power exchanges play a vital role in allowing market participants to trade electricity close to the time of consumption. Examples include Epex Spot (operating in several European countries, such as Germany, France and Switzerland), Nord Pool (serving Nordic and Baltic countries, including Norway, Sweden, Finland, Denmark and Latvia), Ercot (Texas, US), APX Power UK, and JEPX (Japan).

Energy aggregators, on the other hand, act as a bridge between electricity producers and consumers. ‘By sourcing energy from multiple renewable projects, and aggregating demand from various businesses, these intermediaries can structure better terms and enable higher energy availability, passing the benefits on to industrial and commercial consumers,’ says Karel Cornelissen, CEO of NOA, a licensed South African energy aggregator and trader. Importantly, the energy can be sourced from multiple large-scale generation sites that are diversified in terms of geography and technology, with the ability to combine wind, solar PV and battery systems.

As energy traders are making energy more accessible to smaller businesses, they are mitigating risk, which is expected to lower the cost of financing energy projects. However, the continent still requires significant investment to boost its grid infrastructure, distribution systems and interconnectivity.

Although there is still much uncertainty around market regulations and the emergence of aggregators and traders, South Africa’s transition to a liberalised energy market is clearly happening – leading the way for the region and potentially the rest of Africa.

By Silke Colquhoun
Images: Gallo/Getty Images, Pexels