The South African democratic dispensation since 1994 came with huge expectations concerning service delivery including electricity. The new government therefore aimed at providing universal access to electricity within the household sector. A massive electrification programme led by the national electricity utility, Eskom, achieved an increase in the national level of household electrification from about 36% to about 68% by the end of 1999. The next phase of the electrification programme involved the connection of more remote areas requiring carefully thought planning in order to reduce the average connection cost. In this light, PV off-grid became an attractive economic option for less dense rural settlements, and the government, in consultation with various stakeholders, adopted the concessionaire model as the delivery mechanism for the off-grid electricity service to poorer communities in the beginning of 1999. During the two years since the process of implementing this model started, negotiations between different role players have led to significant changes in the structure of the programme and the roles of different parties. The programme no longer entails the establishment of concessions, but rather grants private companies the rights to establish off-grid energy service utilities, with some protection in cases where grid electricity is provided in their designated areas in the future. A detailed understanding of the institutional arrangements has been documented by Afrane-Okese & Thom (2001). This utility service provision model is based on a fee-for-service approach, which guarantees maintenance of the systems in the area of operation of a particular off-grid utility. Up to now only one of the seven initially approved utilities, an Eskom-Shell Joint Venture, has started operating since February 1999 due to the settlement of initial institutional issues. This paper deals with the operational challenges that are facing this off-grid utility in the first phase of its implementation programme. The paper is based on fieldwork experience in analysing these operational challenges facing this off-grid utility and draws lessons for other utilities preparing to start implementation in South Africa.
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