Ramaphosa Address Brings Clarity to South African Energy Sector

Ramaphosa Address Brings Clarity to South African Energy Sector
President Ramaphosa Reveals Eskom Unbundling Plans (RSA Parliament)

South Africa – Brenda Martin, CEO of the South African Wind Energy Association (SAWEA), has welcomed President Cyril Ramaphosa’s recent State of the Nation Address (SONA) saying it has brought much-appreciated investor clarity to the South African energy sector.

“This is a welcome change from stop-start procurement over the past three years, which has inhibited investment, jobs and growth in the sector,” said Martin adding that the move will open the way for the procurement of new renewable energy underpinned by policy certainty.

The energy sector in South Africa is still recovering from an extended procurement hiatus, which was finally ended by President Ramaphosa shortly after taking office in 2018.

“In his address the President has provided clarity on two issues of major concern to the SA energy sector: A firm commitment to investment growth in clean energy and that of Eskom, paving the way for necessary fair market access job creation and GDP growth,” said Brenda Martin.

In his SONA speech, President Ramaphosa revealed that the government of South Africa will soon be unbundling the country’s power utility, Eskom, into three separate entities comprising of "generation", "transmission" and "distribution" under Eskom Holdings. This, he said, was a vital step towards procuring for the country “smarter, cleaner and more affordable energy” and facilitating a managed energy transition that is just, credible and sustainable.

"To ensure the credibility of the turnaround plan and avoid a similar financial crisis in a few years' time, Eskom will need to develop a new business model," Ramaphosa said. "It is imperative that we undertake these measures without delay to stabilise Eskom's finances, ensure security of electricity supply, and establish the basis for long-term sustainability."

Martin also expressed appreciation to government’s continued commitment to addressing the energy industry’s concerns in relation to the need for consistent policy direction that is demonstrated through implementation.

So far, South Africa has seen an investment of close to R202bn (24% of which is foreign direct investment) in the renewable energy sector.

The renewable energy sector has added 26 840 GWh to the national grid and created about 36 500 jobs - with the potential to create many more, noted Martin.

The sector has also invested R640.3 million into socio-economic development contributions to communities with an additional R204.6 million invested in local enterprise development.

Renewable power generation in South Africa has also ensured 27.2 MtCO2e energy-related carbon and 32.2 Mkl energy-related water-uses have been avoided.

Tebogo Movundlela, Chairperson of SAWEA, also commented on President Ramaphosa’s address saying, “We are reassured that government appears to have recognised this strong performance from renewables and chosen a policy path that seeks to optimise their investment potential – specifically with regards to job creation and GDP growth.”

According to SAWEA, which has consistently lobbied government to take a bolder approach to renewables, adopting an approach that smoothens out the procurement allocation and raises annual procurement allocations of renewables can boost both job creation and GDP.

SAWEA proposes that with a smoothed allocation of 1.5 GW of wind power per annum between the years 2021 and 2030, South Africa can expect a total GDP impact by the wind industry alone of approximately R200bn by 2030. At the same over 70 000 jobs in construction, operations and maintenance can be created.

“The Industry continues to support the President’s call to Thuma Mina, part of the hope for a season of renewal, restoring the integrity of our institutions and addressing inequality,” said Movundlela.

“SAWEA and its members have consistently achieved and gone beyond compliance and have enormous confidence in the future of South Africa. Despite the policy uncertainty created by stop-start procurement in previous years, the industry has proven its capacity to deliver built programmes on time and within budget, and that it has the capacity to take on upfront risk and debt on its own and then rely on power purchase agreements over a twenty-year life span.

“We are demonstrated social partners to government and will continue working in partnership to remove the constraints to inclusive growth through growing levels of investment and building a thriving energy sector in this country,” Movundlela concluded.