This time last year electricity was still a joke phenomenon in South Africa
This time last year electricity was still a joke phenomenon in South Africa – a commodity as perplexing as the weather.
Fast forward one general election and several months without load shedding (and one World Cup Rugby triumph), and power supply is suddenly mostly a good news story.
Few would have predicted such a dramatic turnaround.
A case in point is news of a national treasury initiative to promote private sector involvement in South African electricity transmission. Treasury has confirmed a new credit guarantee vehicle backed by the World Bank’s Multilateral Investment Guarantee Agency (MIGA). The move is intended to promote private sector involvement in the daunting task of installing much-needed transmission infrastructure, a task seemingly well beyond the scope of the cash-strapped state which reportedly only managed to add 74km of new transmission lines last year – a proverbial drop in the ocean compared with the transmission line backlog of 14 000 km.
The estimated cost of addressing the backlog is around R400-billion.
Incentivising private sector involvement in electricity transmission via the new investment vehicle could help jumpstart public-private partnership in the same way that the Renewable Energy IPP Programme (REIPPP) changed the power generation landscape.
The Cape Chamber welcomes this latest funding initiative provided that it's rolled out fairly, transparently and effectively. If this is achieved then, in addition to addressing the infrastructure backlog, government would have also succeeded in ‘de-risking’ future transmission projects that might otherwise add to government’s already cumbersome contingent debt liability. Unlike the REIPPP, which involves treasury guarantees, projects under the transmission project are backed by the MIGA. It means investors are afforded confidence without further encumbering the state’s balance sheet.
It is now clear that government is pushing for private sector involvement in infrastructure development, a positive sign in light of private sector appetite to invest in mega-projects. Properly managed, these projects could accelerate overall economic growth.
However efforts to accelerate infrastructure development need to be supported by holistic reform that also addresses crippling backlogs in other key areas, such as law enforcement and logistics. Cape Town’s container terminal is a notable example of a problematic chink in the logistics chain.
Fortunately we are seeing gradual progress in some of these areas, too.
Systematic reforms are already filtering through the economy in the form of growing investor confidence. Our hope is for a sustained period of stability that could see this confidence translate into meaningful job creation and growth.
John Lawson
CEO of the Cape Chamber of Commerce and Industry