On 24 May 2023, the Minister of Trade, Industry and Competition (Minister), in consultation with the Competition Commission (Commission) issued the Energy Users Block Exemption, 2023 and Energy Suppliers Block Exemption, 2023 (Regulations) in terms of the Competition Act 89 of 1998 (as amended) (Competition Act), in response to the country’s electricity supply constraints.
The Regulations allowed energy suppliers, and energy users, to collaborate in alleviating electricity supply constraints by exempting certain categories of agreements or practices from the application of section 4 (horizontal restraints on competitors) and section 5 (vertical restraints on suppliers and customers) of the Competition Act.
They exempted agreements or practices by suppliers of all forms of energy and related products, inputs and services (including for example, electricity, natural gas, liquified petroleum gas, paraffin and diesel; inverters, batteries, solar panels, wind turbines, generators; coal inputs; and storage and installation services) from sections 4(1)(a), 4(1)(b)(i) excluding the fixing of selling prices, 4(1)(b)(ii) and 5(1) of the Competition Act.
On 5 January 2026, the Minister published an Amendment to the Scope of the Energy Users Block Exemption, 2025 (Amended Regulations).
The Amended Regulations broaden the scope of the energy user’s exemption to enable greater collaboration, and in particular, by companies in ‘industries in distress’:
- They provide that the Department of Trade, Industry and Competition and the National Energy Regulator of South Africa are tasked with assessing on a case-by-case basis whether an industry is in distress for purposes of qualifying under the Amended Regulations. The factors to be considered in this assessment include, but are not limited to, whether the industry is experiencing a substantial exit by firms, resulting in industry-wide job losses due to macro-economic challenges.
- Collaborations that have as their sole purpose responding to electricity supply constraints or assisting an industry in distress, are permitted, including: to secure backup or alternative supply, reduce energy costs, promote optimisation/ efficient use of energy, or secure shared/ adjacent sites, infrastructure, equipment and facilities; and to contribute to regulatory measures preventing escalation of the constraint or assisting an industry in distress.
- Collaborations may include: joint negotiation and purchase of energy and related products/ services (including PPAs), joint financing of backup/ alternative supply, and joint purchasing of shared backup/ alternative generation capacity. However, these activities remain subject to the relevant energy regulatory framework.
- The Amended Regulations will remain in operation until withdrawn by the Minister, considering the state of the electricity supply constraint or the state of an industry in distress.
However, there are some important aspects for companies to note before they take advantage of this exemption:
Key competition law exclusions remain in place. The Amended Regulations do not exempt: (i) any discussion and/ or agreements on fixing the selling price of goods/ services to customers or consumers; (ii) collusive tendering; and (iii) resale price maintenance. These practices may still contravene the outright prohibition on price-fixing and market allocation in section 4(1)(b) of the Competition Act, and attract a substantial administrative penalty, even for a first-time contravention of the Competition Act.
Participation by SMMEs and HDPs. Firms owned and controlled by historically disadvantaged persons and small business, micro business or medium-sized businesses at all levels of the value chain must be afforded an opportunity to opt-in to agreements/ practices entered into in terms of the Regulations and/ or the Amended Regulations.
Confirmation by the Commission. Energy users in ‘industries in distress’ wishing to collaborate in terms of these exemptions must seek confirmation from the Commission in writing as to whether their proposed agreement or practice falls within the scope of the Regulations and/ or the Amended Regulations. The Commission must take a decision within 30 business days, failing which the collaboration is deemed to have been confirmed.
Confirmation may also be revoked by the Commission on specified grounds. Monitoring mechanisms are also provided for in the Regulations.
Key takeaways:
The Amended Regulations create a helpful potential pathway for companies in ‘industries in distress’ to collaborate much more in order to reduce their energy costs. However, before engaging in any such collaborations, companies must check to ensure that they meet the strict criteria and requirements set out in the Amended Regulations.
