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Public Enterprises Minister Pravin Gordhan has approved the sale of Eskom's distribution assets to a new state-owned company.
The new company, which has yet to be named, will be a wholly-owned subsidiary of the power utility.
The minister gave his stamp of approval for the deal to go ahead in a letter to Eskom chairperson Mpho Makwana.
Under the Public Finance Management Act, Gordhan's approval is needed for Eskom to dispose of any of its assets.
In his 2019 State of the Nation Address, President Cyril Ramaphosa first announced that Eskom would be split into separate distribution, generation and transmission entities, adding that "bold decisions and decisive action" were needed to save the struggling power utility.
While Ramaphosa said that the government would immediately embark on the process of establishing the three separate entities, the split has been dragged out for the past four years.
But moves to unbundle Eskom appear to have recently gained momentum.
Last month, SA's energy regulator approved a licence for an independent transmission company to operate the country's power grid.
"This is a milestone decision by the energy regulator and will immensely contribute in Eskom’s unbundling trajectory," said Thembani Bukula, chair of the National Energy Regulator of SA (Nersa).
The National Transmission Company of South Africa, like the proposed distribution company, will be a state-owned subsidiary of Eskom.
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In his letter to Makwana, Gordhan asked Eskom to speed up the legal separation of the distribution and generation arms.
"The entity must provide a quarterly progress report on the legal separation of transmission, distribution and generation companies," he said.
The minister also asked for more engagements between his department and Eskom on the model for the distribution company, and how it would make money.
