Last year was challenging for many countries in sub-Saharan Africa. Weak commodity export prices, the burgeoning US economy and poor quality infrastructure in the region took their toll. Drought also affected agrarian economies like Tanzania, Mozambique and Zimbabwe.
Investment in infrastructure, in particular, energy infrastructure could be the kick-start needed to release the region’s economic potential. This is especially true in South Africa, a country with plans in place to significantly boost their power production.
Unfortunately, the huge successes that followed the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) launch in 2011 have now tapered off due to South Africa’s power utility, Eskom’s refusal to sign power purchase agreements.
JCRA, a leading financial risk consultancy, have today released a whitepaper in partnership with the Centre for Economic and Business Research (CEBR) that looks at the state of renewable energy and infrastructure in sub-Saharan Africa with a particular focus on South Africa.
JCRA Director, Lionel Kruger says: “Good infrastructure encourages economic growth wherever it is, but this is especially true in low-income countries such as South Africa. However, Eskom’s stalling is having a detrimental effect on the very industry that could serve to boost the economy.”
Eskom believes that the REIPPPP projects have resulted in a 2016 net loss of R9 billion for the economy, using methodology supplied by the Council for Scientific and Industrial Research (CSIR). However, CSIR argue that Eskom are not applying the methodology correctly, and that the entire REIPPPP process will trigger tariff payments 45% lower and will be almost cost neutral from a pure fuel-saving perspective.
“To have 26 construction projects with a combined investment value of c. R50 billion that could be providing employment to tens of thousands of people on hold indefinitely is simply unacceptable,” Kruger says.
In 2014, the renewable sector alone attracted 86% of foreign direct investment into the South African economy thanks to a relatively open foreign investment policy, and the fact that renewable infrastructure revenue streams closely match the liabilities of their investors.
“The REIPPPP and various other government measures have been a fantastic success and South African renewable energy infrastructure is still an attractive prospect for foreign investors. However, the longer Eskom stall the less appealing and more risky those opportunities become,” says Kruger.
As it stands, South Africa and the rest of sub-Saharan Africa lag significantly behind European and Asian comparators in terms of the quality of infrastructure. In fact, South Africa’s infrastructure quality is only fractionally higher than that of India – a nation with a per-capita income four times lower (see figure 1). The REIPPPP projects will go a long way in bringing the country up to speed.
With good quality infrastructure, comes an increase in living standards and the opportunity to converge with the more prosperous corners of the globe.
Figure 1: Infrastructure holding back overall performance
Source: Global Competitiveness Indicators, World Bank
To access the report via the JCRA website follow the link: http://jcragroup.com/renewable-energy-sub-saharan-africa/
For more information:
JCRA
Thor Bostelmann
External Communications Manager
T: +44 (0)20 7493 3310
CEBR
Scott Corfe
Director
+44 (0)20 7324 2843