South Africa is set to surpass carbon emission goals, but for the wrong reasons. Loadshedding and the subsequent impact on heavy industry have, ironically, proven to be a boon for the environment.



South Africa’s unexpected emissions victory is a silver lining in an otherwise dark cloud. South Africa has recently outperformed its United Nations&#8217; Nationally Determined Contributions (NDCs) emissions reduction targets. However, this victory is not the result of a concerted green initiative or a shift towards renewable energy. Instead, it is a byproduct of the country&#8217;s ongoing loadshedding crisis, a situation that has seen coal-fueled power plants and electricity-dependent heavy industries frequently offline.



The loadshedding crisis, a crippling issue for the nation, has hampered economic growth and caused widespread frustration. In a perverse twist, it has also led to a significant reduction in the country’s carbon emissions.



The year 2023 has been the darkest so far, with over 100 consecutive days of continuous scheduled power outages, at an estimated daily cost of $50 million to the economy. With an estimated 80% of the country’s power generation fleet still coal-reliant, it was forecast that South Africa would only begin to reduce its carbon emissions footprint after 2025, a goal that it is set to surpass at the current rate.



So significant have the electricity outages been that the country appears to be ahead of this target, said Crispian Olver, Executive Director of South Africa’s Presidential Climate Commission, in an interview with Bloomberg on Monday.



“The country may achieve its climate goals as per the NDCs without closing any coal stations thanks to loadshedding and poor plant output.”



While this bodes well for South Africa meeting its climate objectives, it has also been pivotal in securing international financing for the country’s Just Energy Transition plan, which provided $8.5 billion in 2021, the vast majority of which was to be invested in transitions toward renewable energy solutions such as wind and solar power.



However, Minister of Electricity Kgosientso Ramokgopa believes that it is possible to both extend the life of the existing coal power fleet of state-owned generation utility Eskom, while still keeping the country on track to meet its climate goals, a seemingly contradictory position.



“We are modeling the impact of emissions and cost implications, and we will decide whether to extend the life and by what period. But I want to emphasize that we will not renege on our NDCs, our decarbonization agenda, and net zero path by 2050,” said Ramokgopa during a media briefing last week.



However, energy analyst and Managing Director of EE Business Intelligence Chris Yelland believes that these goals are not in conflict. “Low economic growth and loadshedding have already led to a slow decline in electricity consumption,” he said, speaking to FORBES AFRICA. “If we are just running the coal-fired stations we have now…just to see us through the crisis of the next two or three years, that may be palatable to donor countries of the Just Energy Transition Partnership.”



However, Yelland believes both the immediate and most sustainable path forward is still for the country to aggressively pursue the development of renewable energy sources, but it requires the will from the government.



“There are very short-term options for renewable energy, particularly in the domestic, commercial, and agricultural space in particular,” continues Yelland. “But the government&#8217;s focus seems to be on the utility-scale projects, and those will take a minimum of two to three years to come onstream…And that’s not quick enough, we need solutions now.”

Eskom Holdings SOC Ltd. Power Stations as Outages Intensify

South Africa’s Unexpected Emissions Victory A Silver Lining In Otherwise Dark Cloud

Increases in rotational power cuts in South Africa are seeing a deep economic impact, as the already struggling economy deals with hours without electricity daily. 



South African businesses are struggling to cope as another wave of power cuts have hit the country, the worst since ‘loadshedding’ or rotating power cuts were introduced in 2007. With some areas sustaining six-hour long outages for several days in the last week, the Rand hit a weekly low against the US dollar, with local business organizations sounding the alarm at the negative economic impact of the cuts.&nbsp;



“[this] is a serious blow to an economy that is already struggling with low growth and a lack of decisive action,” said small business advocacy group Business Unity South Africa (BUSA) in a statement this week.&nbsp;



The increase in power cuts was heralded by an unprotected wage strike by workers at the state-owned power utility Eskom, which has reportedly caused a lack of staffing and obstruction of maintenance and materials to power generating units. The strike, combined with failures to conduct scheduled maintenance operations resulted in the worst escalation of the power cuts since 2019.&nbsp;&nbsp;



The country is still recovering from the devastating economic impacts of heavy flooding in the KwaZulu-Natal province earlier this year, and civil unrest in July of 2021. The recent increase in loadshedding contributed to the Johannesburg Stock Exchange (JSE) closing 2% weaker on Thursday.&nbsp;&nbsp;



&nbsp; Business management consultancy Nova Economics estimates the increased power cuts to cost the South African economy almost $750 million over the last week, putting the country at an increased risk of a downgrade from ratings agencies.&nbsp;



While efforts are underway to resolve the wage dispute and source increased generation capacity from Independent Power Providers (IPPs), the rewards of these efforts are unlikely to be seen in the short-term.&nbsp;&nbsp;



“Realistically, the energy constraint may only start to ease from late 2024/25,” said economists from the Bureau of Economic Research (BER) in a research note this week. Despite the best efforts of many, the weeks ahead look dark for the South African economy.&nbsp;&nbsp;

Silhouette Skyscrapers Against Orange Sky

South African Economy Stutters Under Increased Power Cuts

One of the most influential fathers of electricity generation in Africa died in the early hours of July 12 aged 90.



Ian McRae, a consummate public servant was born in Germiston, Johannesburg, on September 24 1929 . He joined Eskom, South Africa’s national power generator and the biggest generator of electricity in Africa, as an apprentice fitter and turner in 1947.



McRae qualified with a degree in mechanical engineering and worked his way up to the top of the company in nearly half a century of service laying down the bedrock of the power supply that South African business took for granted for decades. He oversaw the construction of the country’s big six coal-fired power stations, in the 1970s: Kriel, Matla, Duvha, Tutuka, Lethabo, Mathimba, Kendal and Majuba; as well as the country’s three hydro-electric stations: Gariep, Vanderkloof and Cahora Bassa, plus South Africa’s nuclear plant at Koeberg, near Cape Town. McRae was head of operations from 1977 to 1980, head of engineering from 1980 to 1984 and chief executive from 1985 until his retirement in 1994.



Sadly, McRae, a gregarious man-of-the-people, spent his last four months isolated in a home in Edenvale in Johannesburg because of the COVID-19 lockdown. McRae’s remarkable courage came through in his meetings with the ANC in 1988, his promotion of equal opportunity during the height of the apartheid era, and his legendary “electricity-for-all” electrification campaign. These initiatives helped Eskom pre-empt and adapt to the social changes of the 1990s and on retirement McRae left the power generator in good order producing a plentiful supply of some of the cheapest electricity in the world; power that gave birth to a large smelting industry in South Africa. He was also an energetic member of the World Energy Council and the World Association of Nuclear Operators.



“There is no doubt that his integrity, credibility, drive, inherent humility and care for people, also profoundly helped to motivate Eskom staff during many difficult times. In addition, his tenacity of purpose and commitment as a team player enabled Eskom to achieve its strategic goals in the late 1980s and early 1990s, and to survive unscathed through the political transition period of South Africa,” says writer Peter Adams, a former Eskom spokesman, who ghost-wrote a biography of the man.



“A key theme of the book is leadership, and in particular the kind of leadership McRae practiced at Eskom during its phases of both growth and then downsizing. This was essentially one of empowering people within a framework of a clear and inspiring vision. The book is also about McRae the man – his strength and weaknesses, his sense of serving others and Eskom. This is thus the story of a person who has served his fellow man, his company and his country with distinction and humility, using his God-given skills of leadership. In several places in the book, Dr. McRae mentions how being a good mentor is one of the attributes of the outstanding leader. Having benefited himself from good mentorship, Dr. McRae helped to establish the strong culture of mentorship that exists in Eskom today.”



McRae’s wife Jess predeceased him last year, his daughter Heather, died in 2018. His son, Donald, who has written books on boxing and South African rugby, survives him and is a journalist living in London.

Ian McRae

One Of The Influential Fathers Of Power In Africa Dies Aged 90

On February 28, Sandton, known as Africa’s richest square mile, witnessed a wave of red berets and angry faces, as members of the Economic Freedom Fighters (EFF) took to the leafy streets lined with commercial buildings, to protest the power cuts crippling South Africa. The country has seen a spate of load-shedding in recent months due to the Eskom crisis. In this image, an EFF member lapses into a serene moment, looking up helplessly, amidst all the singing and chanting at Innesfree Park where the masses had gathered ahead of a march to the state power utility’s head offices in Sunninghill, singing struggle songs and disrupting traffic.



Image by Motlabana Monnakgotla

EFF 832

Painting The Town Red

The development of liquefied natural gas (LNG) could help transform the South African economy, spur re-industrialisation, reduce the country’s over-reliance on coal-fired power stations, and contribute to increased regional trade.



South Africa has in recent years run into electricity shortages, forcing the country’s utility to&nbsp;burn expensive diesel&nbsp;to keep the lights on. A major polluter, the country also relies on coal to generate almost 90% of electricity. 



On top of this, South Africa has&nbsp;lost&nbsp;its manufacturing competitive edge, which was built on relatively cheap electricity and behind protective trade walls. Electricity prices have increased substantially over the past decade to pay for the power utility Eskom’s two new coal-fired power stations.



READ MORE | <a href="https://www.forbesafrica.com/focus/2019/07/02/south-africans-love-martyrs/" target="_blank" rel="noreferrer noopener" aria-label="‘South Africans Love Martyrs’ (opens in a new tab)">‘South Africans Love Martyrs’</a>



Liquefied natural gas could change South Africa’s fortunes. And government recognises this. Policy developments in recent years have factored in an increasingly greater role for liquefied natural gas in the country’s energy mix and the overall economy, both as a clean alternative energy source and as a spur to industrial development.



The&nbsp;southern African region, specifically Mozambique which already has a pipeline to South Africa, could be the major supplier of gas to South Africa.



In my recent&nbsp;research&nbsp;I argue that to develop a liquefied natural gas sector South Africa could re-purpose existing institutions, namely those relating to the country’s established liquid fuels industry.



The research traced the evolution of gas developments in the country from 1998 to 2018. It found a close interaction between the electric and the liquid fuels sectors. At present gas contributes about 3% to the country’s primary energy mix, but there are indications that it will feature more prominently over the next decade.



READ MORE | <a rel="noreferrer noopener" aria-label="Oil Major Total Plans Biggest Exploration Drive in Years (opens in a new tab)" href="https://www.forbesafrica.com/current-affairs/2019/01/29/oil-major-total-plans-biggest-exploration-drive-in-years/" target="_blank">Oil Major Total Plans Biggest Exploration Drive in Years</a>



There are&nbsp;number of reasons&nbsp;for pursuing gas. They include:



<ul><li>energy diversification and security to reduce the country’s dependence on coal for electricity;</li><li>reduction of Green House Gas emissions;</li><li>provision of flexibility to the introduction of renewable generation into the electricity grid; and</li><li>facilitating the development of provincial industrial hubs and regional trade within the Southern African Development Community.</li></ul>



<h4 class="wp-block-heading">Three phases of gas development</h4>



South Africa’s history with gas can be delineated into three periods. Firstly, from 1998-2005, South Africa significantly reformed its energy sector. This included the&nbsp;1998&nbsp;white paper on energy, which recognised natural gas as an option to diversify the country’s energy mix. In 2001 the&nbsp;Gas Act&nbsp;was implemented, facilitating the development of gas infrastructure in the country through pipelines and the regulatory framework.



Significantly, in 2004, a pipeline between Mozambique and South Africa began pumping gas. Sasol, a dominant player in the country’s liquid fuels industry, was behind the 865 km gas pipeline. While the majority of gas transported through the pipeline goes to Sasol, the pipeline has nonetheless created demand to around 370 industrial and commercial customers via 530 off-take points.



READ MORE | <a rel="noreferrer noopener" aria-label="Renewable Power Surge In Africa Faces A Shortout: Not Enough Workers (opens in a new tab)" href="https://www.forbesafrica.com/focus/2019/01/31/renewable-power-surge-in-africa-faces-a-shortout-not-enough-workers/" target="_blank">Renewable Power Surge In Africa Faces A Shortout: Not Enough Workers</a>



The second phase covers 2006 &#8211; 2012. This is when gas started to feature more strongly in South Africa’s energy policy. A few turning points occurred. One was the substantial&nbsp;shale gas potential&nbsp;reported by the United States energy information agency. This encouraged policy makers to include gas into the energy mix. Second, natural gas discoveries in&nbsp;Mozambique&nbsp;and Tanzania raised the potential for regional trade.



Thirdly, South Africa experienced an electricity crisis, culminating in blackouts in 2008. In response, the state power utility Eskom turned to the costly diesel&nbsp;Open Cycle Gas Turbines. But this was hugely expensive and Eskom burnt through its operating budgets to ensure a steady supply of electricity.



<h4 class="wp-block-heading">Global trends: the main driver</h4>



During the third phase, from 2013 to 2018, gas development started to gain momentum driven by major global trends. These include the trend toward&nbsp;liquefaction of gas&nbsp;which enabled transportation of gas to places where pipelines weren’t possible.



Secondly, gas prices began changing from long-term to short-term contracts. This opened up the trading of gas to a competitive, spot market. As a result, new buyers have been attracted into the sector.



Thus, by 2015, the Department of Energy had announced the Gas Independent Power Producers Procurement Programme (Gas I4P) with a procurement of 3.7 GW electricity generation.



READ MORE | <a rel="noreferrer noopener" aria-label="Private Wealth: Banking On Climate Change In Africa (opens in a new tab)" href="https://www.forbesafrica.com/wealth/2019/07/15/private-wealth-banking-on-climate-change-in-africa/" target="_blank">Private Wealth: Banking On Climate Change In Africa</a>



By August 2018 the country’s draft integrated resources plan had gas playing a significant role in future electricity generation. The indications were that gas would contribute as much as 15% of the installed capacity&nbsp;mix by 2030. This seems to suggest that energy policy makers believe gas to power has the necessary fit, form and compatibility with the electricity system.



Another factor that’s driven interest in gas is the belief that it could be the country’s next commodity resource, as the country’s mining future is in decline. Some actors in the oil and gas community are pushing for the country’s mining skills to be used in the gas sector. This is informed by the view that the exploration and drilling skills used in the gas fields are similar to those used in mining.



<h4 class="wp-block-heading">The future</h4>



South Africa’s existing institutional infrastructure can be used to develop the liquefied natural gas industry. That won’t be an easy task. There are major efforts required to amend the Gas Act, the Ports Act, Mineral and Petroleum Resources Development Act, and the Electricity Regulations Act, in order to accommodate the LNG initiative.



Gas can also play an important role in the restructuring of the electricity system. As there are trend towards transactive energy, where utilities moves towards customer centric demand, in that grids become less passive and deterministic, and more active and stochastic. Here gas could play a crucial role, as it has features which are flexible and modular enabling a decentralised system. Lastly, there are opportunities for gas as potential feed-stock in industrial processes, which requires strategic reassessment of existing industries.



-Marie Blanche Ting; Doctoral researcher, University of Sussex



-The Conversation 



<img loading="lazy" decoding="async" src="https://counter.theconversation.com/content/118726/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important" />

gettyimages-1141662662-170667a

How Liquefied Natural Gas Could Change South Africa’s Fortunes

Small medium and micro
enterprises (SMMEs) that are feeling the strain from Eskom’s load-shedding are
appealing to the South African government to come up with a solution, because
they are forced to shut their doors. 



<hr class="wp-block-separator"/>



South Africa has been experiencing stage 4 load-shedding from the beginning of March. As a result, power cuts are forcing small businesses to shut their doors as swiping facilities and security cameras do not function. 



Johannesburg based Gim Bekele, who owns a clothing store in Randburg, says they are losing a significant number of customers as a result of load-shedding. 



“When there is load-shedding we are forced to closed the shop because people can’t come in when it is dark. The cameras are not working as well as the cashier machines,” he says.       



“So that means we lose out on a lot of money. On a normal day without load shedding we make above R5,000 but when there is load shedding, it is a struggle to even reach R1,000,” says Bekele. 



READ MORE | <a href="https://www.forbesafrica.com/economy/2019/02/20/budget2019-south-african-not-taking-on-eskoms-debt-but-will-provide-funding-place-it-under-curatorship/" target="_blank" rel="noreferrer noopener" aria-label="#Budget2019 | South African government not taking on #Eskom’s debt (opens in a new tab)">#Budget2019 | South African government not taking on #Eskom’s debt</a>



Bekele says between the loss of
customers and an increase in the monthly expenses he can no longer afford to
pay his employees.&nbsp; 



“I had to let go of two employees because I could no longer afford to pay them.  The rent is high, and now we are barely meeting our sales target because of load shedding, how could we continue to pay for their salaries as well?”  



“We can’t even afford a
generator at this point,” added Bekele. 



Another entrepreneur, Shaodong Zhuang who owns a takeaway shop in Randburg says his stock is compromised.



“I usually sell fresh meat and some of my meat gets spoiled and I have to throw it away,” says Zhuang.



<blockquote class="wp-block-quote">I am basically making a small change. Our government is really not good. The people are suffering heavily because they are not running things properly.</blockquote>



Energy expert Adi Nchabeleng says that small businesses should brace themselves because there won’t be any turn around soon, but they could expect to see some form of solution a year from now. 



“It is a delayed reaction that
caused this whole advent of load-shedding.&nbsp;
The current executive and the new democratic dispensation inherited the
current dispensation of Eskom years ago and they didn’t do anything with any of
power stations.&nbsp; They just used them as
they are,” says Nchabeleng. 



Nchabeleng says that it is unfortunate
that small businesses have to take the heat for poor planning. 



“If they do not have enough electricity reserves it means their shops and businesses must be closed. A lot of people are going to be out of jobs… So the impact of load-shedding on businesses is so severe. 



“In order for the business to survive, you need to spend R500 ($7,25)-R1,000 ($14,49)daily, just to make sure that the generator has fuel, and I don’t think the government understands the seriousness of this matter,” says Nchabeleng.



“They have not woken up to the
reality of what the people go through,” he added. 



READ MORE | <a href="https://www.forbesafrica.com/economy/2019/02/13/south-africas-eskom-extends-power-cuts-needs-bailout-by-april/" target="_blank" rel="noreferrer noopener" aria-label="South Africa’s Eskom Extends Power Cuts, Needs Bailout By April (opens in a new tab)">South Africa’s Eskom Extends Power Cuts, Needs Bailout By April</a>



He advises that in order for small businesses to weather the electricity crises, they need to reduce their expenditure but he does not foresee that as the best solution for employees.  



“The usual expenses that the majority of businesses will choose to cut are their staff. They will say ‘when we have load-shedding we don’t need workers.’ We cannot go for that solution, we need to look at a much more different solution in relation to businesses,” says Nchabeleng.



He believes that the South African government should take responsibility for providing SMMEs with assistance. 



“I would suggest that the government compensate the losses incurred by small businesses. This is a direct cost problem; this is not something that happened sporadically. The government knew that there was going to be load-shedding, they knew that there was not going to be enough power available,” says Nchabeleng.

SMMEs Meltdowns Continue Because Of Eskom Power Cuts

Treasury sets out plans to render on to Caesar what belongs
to Caesar. 



<hr class="wp-block-separator"/>



 Revenue collection remains a bugbear for government due to weak economic growth and tax administration concerns, which were self-inflicted, South Africa’s Finance Minister Tito Mboweni told journalist in a Budget press conference. 



The revised tax revenue estimate for 2018/19 is R15.4 billion lower than anticipated by the 2018 Medium Term Budget Policy Statement (MTBPS) estimate. Thus the projected revenue shortfall of R27.4 billion is now R42.8 billion compared with the 2018 Budget estimate. 



This sombre news was revealed by Mboweni in his maiden Budget on Wednesday. To address this shortfall, tax changes designed to raise R15 billion in additional tax revenue in 2019/20 have been introduced.



These among others include:



<ul><li>Increasing the tax-free threshold for personal income taxes from
R78 150 to R79 000. No changes will be made to personal income tax
brackets.&nbsp; </li><li>Increasing the fuel levy by 29c/litre, consisting of a 15c/litre
increase in the general fuel levy, a 5c/litre increase in the Road Accident
Fund (RAF) levy and the introduction of a carbon tax on fuel of 9c/litre.&nbsp; </li><li>Increasing excise duties on alcohol and tobacco products by between
7.4 per cent and 9 per cent. The targeted excise tax burden for wine, beer and
spirits is 11 per cent, 23 per cent and 36 per cent respectively.</li><li>No change in the monthly medical tax credit for medical scheme
contributions.</li><li>Increase in health promotion levy from 1 April from 2.1c to 2.21c
per gram in excess of 4 grams of sugar per 100ml. </li><li>Limiting the RAF levy diesel refund for primary production
industries to ensure that diesel users in these sectors equitably contribute
towards their RAF indemnity.</li><li>The implementation of carbon tax on 1 June 2019. </li><li>Government proposes to align the tax treatment on ad valorem
excise duty on motor vehicles Because of the way ad valorem excise duty is
calculated, vehicles produced locally are taxed at a higher rate than imported
vehicles. </li><li>Government intends to publish draft legislation for public comment
during 2019 on a gambling tax. </li><li>Urban development zone tax incentive to be reviewed. </li><li>South Africa reviewing its oil and gas tax regimes in 2019. </li><li>Taxing electronic cigarettes and tobacco heating products. </li><li>Definition of fuel levy goods for tax purposes to be reviewed may
include mineral ethanol, illuminating paraffin, aviation kerosene, liquefied
petroleum gas, compressed natural gas – as well as biofuels such as bioethanol
and biogas</li><li>Tax on “single-use” plastics including straws, caps, beverage cups
and lids, and containers to curb their use and encourage recycling will be
considered. </li></ul>



Although few, government has also introduced a number of tax incentives. These include: 



<ul><li>From 1 March 2019, employers participating in the Employment tax
incentive will be able to claim the maximum value of R1 000 per month for
employees earning up to R4 500 monthly, up from R4 000 previously. The
incentive value will taper to zero at the maximum monthly income of R6
500.&nbsp; </li><li>From 1 April 2019, the list of items for zero-rating for VAT will
include white bread flour, cake flour and sanitary pads.&nbsp; </li><li>Energy-efficiency savings tax incentive to be extended to 31
December 2022. During 2019, government will review the design and
administration of the incentive to improve its ease of use, effectiveness and
economic impact.&nbsp; </li></ul>



Treasury has also recognised that to render on to Caesar, what belongs to Caesar it needs to restore the efficiency of SARS. To do this it plans to:



<ul><li>Appoint a new SARS Commissioner in the coming
weeks.</li><li>It has established a new Illicit Economy Unit to
fight trade in the illicit economy.&nbsp; </li><li>Officially launch the Large business Unit in
early April 2019.&nbsp; </li><li>Strengthen SARS IT team &amp; systems. </li><li>Establish information sharing agreements with
allies to help fight cross-border tax evasion schemes.</li><li>Set up an inspector-general for tax administration.</li><li>Through internal processes, SARS will implement recommendations
concerning inappropriate actions, fruitless and wasteful expenditure, unfair
labour practices and maladministration.&nbsp; </li><li>SARS will review contracts that breached public procurement
regulations and will act to recover funds spent.&nbsp; </li><li>SARS is normalising refund payments. </li></ul>

ED_0077667

#Budget2019 | South African government not taking on #Eskom’s debt

South African power utility Eskom cut electricity for a fourth straight day on Wednesday, as the department of public enterprises warned the struggling state-owned firm needed a cash injection by April to survive. 



Eskom, which supplies more than 90 percent of the power in Africa’s most industrialized economy but is laden with more than $30 billion of debt, is battling a shortage of capacity that threatens to derail government plans to lift the sluggish economy.



President Cyril Ramaphosa said last week that the government would support Eskom’s balance sheet but said details would be announced in a budget speech by the finance minister on Feb. 20.



The department of public enterprises, which oversees Eskom, said in a presentation to parliament that Eskom was technically insolvent and would “cease to exist” at the current trajectory by April, unless it gets the bailout. The minister, Pravin Gordhan, however, ruled out privatization of the utility.



The department also said Eskom was struggling to keep its mainly coal-fired plants running due to coal shortages and poor maintenance, with 40 percent of breakdowns a result of human error.



The cash-strapped company said it would cut 3,000 megawatts (MW) of power from the national grid from 0600 GMT on Wednesday, likely until 2100 GMT. This follows a similar cut on Tuesday and 4,000 MW on Monday in the worst power cuts seen in several years that drove the rand currency down on Monday. The rand was slightly firmer against the U.S. dollar on Wednesday.



Around a third of Eskom’s 45,000 MW capacity was offline on Tuesday.



The power cuts are prompting frustration among ordinary South Africans, with traffic gridlock in major cities during rush hours as traffic lights stop working and switched-off fans leave office workers sweating in the summer heat.



Business owners with no access to backup power sources have also been hit.



“We’re struggling,” said Eunice Mashaba, a manager of a textile shop north of Johannesburg who said he had to close the shop early on Tuesday because most customers do not carry cash but have to rely on debit or credit cards for payment.



Ramaphosa announced a plan last week to split Eskom into three separate entities in an effort to make it more efficient as he tries to lift the economy before an election in May, but faces opposition from powerful labor unions and from within his ruling African National Congress party. -Reuters



-Olivia Kumwenda-Mtambo and Wendell Roelf

View of electric pylons in Randburg, viewed from Republic Road, Johannesburg, Gauteng, South Africa.

South Africa’s Eskom Extends Power Cuts, Needs Bailout By April

The South African Reserve Bank will not raise interest rates again until May, according to a Reuters poll, taken after the central bank surprised many economists last month by adding 25 basis points to borrowing costs.



The median forecast in the poll of 25 economists, conducted over the past week, suggests the central bank will wait until May before hiking interest rates by another 25 basis points, taking its key rate to 7.00 percent.



The Reserve Bank increased its benchmark lending rate for the first time in nearly three years last month, saying the risk of higher inflation in the longer-term remained elevated and that it could not risk waiting until later to take action.



“Risks to the inflation outlook remain to the upside, on possible rand depreciation and above inflationary increases in administered prices, particularly electricity tariffs,” Investec economist Kamilla Kaplan wrote in a note.



She pointed out that debt-troubled state-run utility Eskom proposes to increase electricity tariffs by 15 percent a year for the next three years.



The poll predicted inflation would quicken to 5.3 percent next year from 4.7 percent in 2018.



A separate poll last week suggested the rand&nbsp;<a href="https://www.reuters.com/finance/currencies/quote?srcCurr=ZAR&amp;destCurr=USD">ZAR=D3</a>&nbsp;will erase around a third of the 10 percent gains it made in the past two months in the run-up to elections next May as strong volatility rattles the currency, adding to inflationary pressures.&nbsp;



However, the Reserve Bank reacts more strongly to any signs of second round effects on its inflation outlook rather than to currency weakness.



Another poll showed analysts are increasingly pessimistic about the prospect of an oil price rally next year, even though markets expect OPEC to cut output.&nbsp;



<figure><iframe src="https://queso-cdn.prod.reuters.tv/new/index.html?autoplay=false&amp;muted=false&amp;countdown=true&amp;preroll=false&amp;poster=https%3A%2F%2Fajo.prod.reuters.tv%2Fapi%2Fv2%2Fimg%2F5c11814ae4b0653ed1a867f1%3Fwidth%3D640%26location%3DLANDSCAPE%26videoId%3DOV9AN4UX7&amp;mid=OV9AN4UX7&amp;title=Wall%20Street%20rises%20on%20trade%20optimism&amp;suppress_ads=false&amp;suppress_rtv=true&amp;source=https%3A%2F%2Fwww.reuters.com%2Farticle%2Fus-safrica-economy-poll%2Fsouth-africas-central-bank-to-wait-until-may-for-next-rate-hike-reuters-poll-idUSKBN1OC0D6&amp;chartbeat_uid=52639&amp;chartbeat_domain=preview.reuters.com&amp;region=US&amp;draggable=true&amp;hide_title=false&amp;basic=false&amp;allow_collapse=true" allowfullscreen="true"></iframe></figure>



Wall Street rises on trade optimism



Brent crude LCOc1 eventually affects local inflation, from factories through to consumers.



South Africa’s Reserve Bank tries to keep inflation in the middle of its 3-6 percent target range.



The South African economy is expected to expand to 1.5 percent next year from 0.7 percent this year. The economy expanded 2.2 percent in the third quarter, taking the country out of recession. -Reuters



<ul><li>Vuyani Ndaba</li></ul>



<ul><li>Additional polling by Khushboo Mittal in Bengaluru</li></ul>

South African Reserve Bank, Pretoria, Tshwane, Gauteng, South Africa

South Africa’s Central Bank To Wait Until May For Next Rate Hike

Across the globe, more nuclear power units are under construction today than at any other time in the last 25 years. This is happening despite the 2011 crisis in Japan at Fukushima. It is important to note the Fukushima crisis and resulting problems was not a result of a nuclear disaster, but rather a tsunami that laid waste to large parts of Japan and killed around 20,000 people.
At the start of 2015 there were 436 operating nuclear reactors across the globe. By year-end this had increased to 439, despite the closure of seven units during the year. The countries driving nuclear construction are largely in Asia, with China, at last count, building 30 new reactors to add to their fleet.
In South Africa, it’s clear that the government is intent on pressing ahead with a new nuclear build program. The Integrated Resource Plan calls for 9,600MW of nuclear power and this still seems to be the target for the new build. One reason seemingly being that since nuclear is an expensive and complicated industry; it would simply be more cost effective over the long term to invest in a fleet of reactors that can be supported by an underlying industry. If this should transpire, it will certainly lead to a boom in jobs across many sectors of industry.
The environment is another reason nuclear power is punted as an option for South Africa. At the United Nations Climate Change Conference in December, countries reached an agreement to hold the average global temperature increases to less than 2 degrees Celsius, compared to preindustrial levels. The targets agreed upon will require significant reductions in the global greenhouse gas emissions and one of the major areas targeted for reduction of carbon dioxide outputs would be energy generation. The bulk of the globe’s electricity is still generated by fossil fuels, with nuclear power supplying roughly 10% of global electricity. The use of nuclear power is recognized as being a means to achieve climate change targets.
Another serious question around South Africa’s energy future is the planned decommissioning of old power plants. By 2030, Eskom, by law, must close down 14,800MW of existing capacity, while Eskom’s new mega build projects will only add 10,932MW over the same period. These older plants are currently supplying a large part of South Africa’s baseload electricity. The country can ill afford to lose such a big part of its capacity and there is still no clear plan as to what will replace this baseload capacity. The role of renewables is limited; the availability of power output from renewable energy is still not comparable to that of fossil fuel or nuclear plants. Add into the mix the environmental considerations and there is only one option to replace old baseload with new baseload – nuclear.
The major constraint to a new nuclear build in South Africa is funding. Accurate estimates of what a 9,600MW fleet could cost are largely unavailable; they range between $45.4 billion and $68 billion. The only thing we know for sure is that is going to be very expensive. There are other concerns over safety, waste and the ability to run a corruption free and timeous build process.
However, there are also some benefits. The country cannot ignore the environmental issues and the need for a reliable baseload power system that can allow the economy to grow. The South African economy may be moving away from mining but there is no need to ignore the potential in the future of mining, as well as in added beneficiation. Reaching this potential would require a lot of electricity and of course, the more the economy grows, the greater the need for electricity.
Where will the first new plant be built? The Eastern Cape province still seems the most likely area. When will the first new reactor be built? The current economic downturn has given the country some breathing room and the pressure is off for now, but there can be little doubt that new construction could start within the next two years. Following that, the full fleet of 9,600MW could follow over the following 20 years. In addition, given government’s appetite for nuclear power, I would not be surprised if South Africa sees more than 9,600MW of nuclear power by 2050.
Is that a good thing? Time will tell.
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James-Brent Styan authored a book on the energy crisis called Blackout, The Eskom Crisis. It was published in 2015. He writes in his personal capacity.

The Good, Bad…  And expensive

Wind, solar and hydro energy have all been highlighted as sources of energy that help meet Africa’s growing power needs. Ghana’s Dela Wosornu is using garbage.
Decomposing organic material, known as biomass, releases gas that can be used to create energy in the form of biofuels. In Ghana, a country with a vast amount of degradable material, it is a viable option for alternative energy.
In Ghana, energy is costly and scarce; this hinders economic growth.
Biomass, such as wood and charcoal, is Ghana’s main energy source, supplying around 60% of the total energy used in the country. Biomass resources cover about 20.8 million hectares of land mass in Ghana. Most of this land is made up of crops and plants that can be converted into solid and liquid biofuels. Wosornu, a renewable energy entrepreneur, is taking advantage of this by transferring landfill gas to energy.
He is involved in the Oti Sanitary Landfill Gas-to-Energy Project, which eliminates the emission of harmful greenhouse gases as well as the spread of disease from the waste. The project reduces the reliance on producing power from fossil fuels by producing energy from the waste that would have otherwise been buried in the landfill.
The solution is quite innovative.
When organic material, such as food waste, is buried in the landfill, it is deprived of oxygen. In this condition, the organic material will decompose and turn into methane gas. The methane will slowly be released into the atmosphere, causing global warming. The project at the Oti landfill doesn’t let this happen. They cover the landfill with soil and drill holes into it. Pipes are then inserted and the gas is sucked out into a generator which makes heat and electricity.
“It’s really a matter of just bringing pipes to where the gas has collected and pumping it out through a vacuum process and then directing that gas to a generator,” says Wosornu.
According to Wosornu, the project is the first of its kind in Ghana. As cities grow and produce more waste, the environmental impact from open dumps becomes increasingly intolerable. The conversion of dumps to engineered landfills like the Oti project is essential.
“Our solution can be applied at any landfill that has received at least 400 tons a day of municipal solid waste and is in reasonably good shape. As there are many landfills in Africa and around the world that are not capturing gas, the future for landfill gas to energy projects is bright,” says Wosornu.
Landfill gas to energy projects have underperformed relative to projected gas and power output. Bearing this in mind, the projected output of the Oti project has been discounted by 70% so that its actual output will meet or exceed the projected output. The Renewable Energy Act in Ghana ensures that there are set prices for each class of renewable energy. It also offers an opportunity to redirect future investments into green energy.
The challenge for Wosornu, is finding reliable buyers for the project’s output. The high cost of doing business in Africa also makes the development costs of these projects higher than the rest of the world.
“There is no doubt that, if properly exploited, renewable energy resources in Africa can make a significant contribution to the continent’s energy supply. In particular, the potential of biofuels on the continent is huge. Within the context of the current financial crisis, stakeholders including policy makers, international partners and the UN should lead the debate on and collectively seek strategies for scaling up renewable energy use so as to increase access to energy and enhance energy security among the many potential benefits of these technologies,” says Kandeh Yumkella, Director-General of the United Nations Industrial Development Organization (UNIDO).
Wosornu is playing his part.

Full Steam Ahead

From Junk To Power

When Luke Callcott-Stevens, Gavin James and Doug Jenman first talked to FORBES AFRICA in 2012, they struggled to imagine what their $274-million 100MW wind farm in Dorper, South Africa, would look like. A big project with big risk.
“We built a wind farm, we installed it. All those are effectively at the cost of capital. Now it’s done… Every three days a wind turbine is being installed in South Africa,” says Jenman.
Forty wind turbines and two and a half years later, this trio from Rainmaker Energy can not only take pictures of Dorper, a tiny town in the Eastern Cape province, they are now imagining that they can cover the rooftops of London with solar panels.
“The cities of tomorrow will produce their own electricity. We won’t need power stations,” says James.
With this bold idea, the trio set up shop at 81 Rivington Street, an old electrical showroom, in London’s tech hub Shoreditch, and also, by coincidence, labeled with a fitting coat of arms “More Light More Power”.
“A lot of our growth is happening in the solar field, and it’s out of South Africa. We’ve set up a separate company in the UK, Solar Stone Energy; effectively we are trying to create a utility scale solar project on rooftops. So we are aggregating a bunch of rooftops to build a big solar power plant,” says Callcott-Stevens.
It gets even more pie in the sky – especially when we are talking about a city where the sun doesn’t shine often – the trio want to give solar panels for free.
“We cover the costs of the installation and on-going monitoring and maintenance. There is absolutely zero cost to you. You then get to enjoy the immediate benefit of reduced energy costs because the electricity, which is produced on your property’s roof is yours to use, for free. By generating electricity on your roof, we receive a Feed-in-Tariff (FiT) through a government-backed subsidy program. This is how we fund the solar installations and make a return on investment. It’s a win-win for everyone.”
They feel it could find favor with London’s 8.3 million people.
“If you look at what’s happening in the States and in Europe, in solar and wind energy, people are putting solar on their roofs and creating their own power. That is not a total solution, but it cuts back on the need to create new power plants, it changes the game. The utility business is now losing out on its most profitable market. That demand is now gone,” says Callcott-Stevens.
“Solar has gotten cheaper. Next storage is going to get cheaper. That’s not to say you won’t have coal or nuclear power stations. It just changes the game. It changes the dynamics,” says James.
Back home in sunny South Africa, where 39 renewable energy projects contribute 1,800MW to the grid, the trio’s 100MW wind farm in Dorper has been humming for more than a year. Although James says it will take another 16 years to see a profit, it couldn’t have come at a better time. Eskom, South Africa’s power supplier, regularly cuts the power – a legacy of under investment and delays in coal-fired power stations, such as Medupi and Kusile. The work of renewable energy dreamers has been a saving grace.
“Eskom’s troubles are our blessings in the whole [renewable] industry. It’s been good. The government has put its weight behind the program,” says James.
“They are seeing results and they are happy with it, so the whole fear that renewables is erratic and unreliable actually is false. Apparently the first projects have reduced power cuts by half. We would have double the power cuts if it wasn’t for the renewable projects,” says Jenman.
The competition for new projects is stiff. Last year, Eskom announced that 77 bids were received for Round 4 of the program, for a total of 5,804MW. Of these, 13 were accepted as preferred bidders, for a total of 1,121MW installed capacity at a cost of R23 billion ($1.8 billion).
“By the fourth round, the tariff prices have halved. The game’s changed. The perception of risk is gone. In Round 1 there was no market in South Africa; people were taking a lot of risk without knowing if there was going to be a market. They needed higher returns. Where we are now, the return expectation is lower, as it should be, as the market grows and matures,” says Callcott-Stevens.
“Without getting those high returns in the beginning we wouldn’t be in a place where we are established,” says Callcott-Stevens.
Hope of more business in Africa is in the wind. The trio has a further 330MW of wind and 290MW of solar photovoltaic (PV) projects under development in South Africa.
“Africa is the future – solar is all over. There is potential everywhere. Sub-Saharan Africa is obviously closer to home so it’s easier to look at. The [solar rooftop] model works really well in a deregulated market. In South Africa, we are still highly regulated,” says James.
“The rest of Africa is highly regulated. Either badly regulated, or highly regulated. We don’t want to just get on a plane and go find a site. We like to have an angle before we choose a market. There needs to be a reason before we can just go into that market. We can’t just go into a country and just say we are building a solar plant. We need to have relationships, we need to know people, we need to understand the market first,” says Callcott-Stevens.
From the dream of a small windy farm in the middle of nowhere, in Africa, to the reality of free solar panels on the rooftops of London where the sun hardly shines. What next?

The Cities Of  Tomorrow  Won’t Need Power Stations

She is the fresh face of renewable energy in Africa. By a twist of fate, this young lawyer, who grew up with her grandmother by candlelight, is now spearheading Africa’s dash for energy.  Sometimes it hurts.
“It feels like I haven’t slept for four years, I have been so busy working on deals. But it was the deal of a lifetime.”
So says Linda Olagunju on her deals to put two wind farms and two solar photovoltaic (PV) farms onto the barren landscape of De Aar in the Northern Cape. Two deals she patched together that will contribute 254MW to South Africa’s energy grid.
“The wind projects reached financial close and are currently under construction. It’s a partnership between China Longyuan, Mulilo and DLO Energy Resources in De Aar. It’s been almost one year of signing documents. The legal fees on these sorts of transactions can go up to R20 million ($1.57 million) if you are lucky.”
It’s the fruit of the Renewable Energy Independent Power Producers Procurement (REIPPP) program. In short, Eskom, the country’s power generator, attracted bids for private business to apply for tenders. Under it, investors generate electricity for sale at a tendered rate. This brings the total committed private sector investment in the REIPPP, since 2011, to $13.25 billion (R168 billion). It is fierce competition.
“There about 85 solid IPP [independent power producers] developers in South Africa. In Round One to Four, there was 5,200MW on offer, the next rounds are 6,300MW. It’s a bloodbath. You are competing with international companies that are coming in dirt cheap,” says Olagunju.
This may be a drop in the ocean but it’s a very important one. Renewables have been a saving grace. According to Olagunju, 39 of these projects are up and running, supplying 2,050MW to the grid.
“It’s the first successful program since democracy. It’s not that there haven’t been any independent power producer programs on the continent. It’s just that this one is the largest one of its scale and being backed by government.”
Olagunju’s childhood was far from electricity. She grew up in Matatiele, a village in the Eastern Cape 782 kilometers from the boardrooms of Sandown where she now works and lives with her Nigerian-born husband.
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“It was rural, like candle rural… [My grandmother’s village] only got electricity in 2005,” says Olagunju.
This was in time for the power cuts of 2008, when Eskom admitted that it had run out of capacity to supply electricity. At this time, Olagunju had left home to follow in the footsteps of her father and study law. At the University of Cape Town she studied laws governing fossil fuels rather than green energy.
“I’ve always known I was going to go into resources. I just didn’t know if it was going to be mining or oil and gas. The biggest thing for me is why Africa, which is so well endowed in resources, remains the poorest continent. I always hated injustice, growing up in apartheid South Africa,” she says.
Olagunju struggled to find her niche and ended up as a lawyer for Mulilo, a startup renewable energy company in 2008.
“Mulilo needed a lawyer, but couldn’t afford any. So I said I would do the services in return for shares. I still had to pay for them. At the time, the company [owed] R11 million ($870,000) and the company is now valued at R5 billion ($394 million)… in three years,” she says.
This sparked her idea of entrepreneurship.
“I always felt the way to change things is through entrepreneurship. Through law I had the opportunity to see how government makes these decisions on large scale projects… I said ‘hang on a minute, we have a lot of wind in South Africa and we have a lot sun in South Africa, so why haven’t we put renewables on our grid?’ I started doing research,” she says.
The business of renewables can take years to see a profit.
“There is a lot of risk, anything can go wrong. You are in a contract for 20 years, governments can change and I know there are laws to take care of that risk. The wind may not blow for as long as you thought it would. Your sun may not shine as brightly as you thought it would. They are long-term projects.”
“You identify the land. You go into lease agreements. Do an environment impact assessment (EIA) process that can take three years if you are lucky. You then bid your process with a construction period. If everything goes right, [a farm] will be up in 20 months.”
“Then you start seeing a trickle dividend. A trickle dividend at connection in the first seven years is very minimal. It’s nothing to write home about. It’s not even enough to pay your operational expenses.”
Then, there are the hiccups.
“We have existing infrastructure. And then we have the [REIPPP]. The grid infrastructure hasn’t been expanded to accommodate the increasing demand on that particular infrastructure. It’s not Eskom’s fault necessarily. It’s a matter of planning.”
“One of the points we raised before we began these projects is getting the grid contacted properly before you have a program. But it’s always difficult how you spend on infrastructure not knowing where those programs are going to be awarded.”
“Eskom said that they have developed a map where they now know where the hotspots are for energy projects and where now they are doing their best to upgrade in those regions in anticipation of the other [REIPPPs] being built.”
Olagunju believes gas, coal and nuclear could all go the same way.
“You can go and leverage an asset and try and participate. The key thing about these deals is to learn from them. Once you do one, you have built a portfolio. You can go and knock on a door in Nigeria, rather than say you have an idea,” she says.
If you are Olagunju, at the tender age of 31, you could also argue it’s good to have a foot in the door.

A Bloodbath In The Wind

From the boardwalks of Cape Town to the streetlights of Kigali, billions are being made out of renewable energy. It brings business and government together; it could end the days of smoke-belching coal-fired plants. It could answer Africa’s most burning question – power.
In 2011, many experts scoffed at the thought of Africa running on towering wind turbines and miles of solar panels. It was too expensive; it was inefficient and couldn’t stay charged. But, armed with new technology, a pack of young entrepreneurs dug deep to harness the wind and the sun of Africa, to power future generations.
In this continent, South Africa’s Renewable Energy Independent Power Producers Programme (REIPPP) has moved the fastest. In a few short years, South African entrepreneurs have invested $13.25 billion to sell electricity back to Eskom, the country’s hard pressed power generator.
It is fierce competition. According to South Africa’s President Jacob Zuma, 1,800 megawatts (MW) are on the grid and in the next two and half years, 92 projects will generate up to 6,327MW. Further investment into hydro, gas and nuclear power are also on the cards, says Zuma.
The faces driving this investment are fresh. Thirty-one-year-old Linda Olagunju who grew up in an African village by candlelight is now calling the shots in boardrooms. Homegrown entrepreneurs Luke Callcott-Stevens, Gavin James and Doug Jenman threw in their safe jobs for the cutting edge of renewable energy generation. These are a few of the young and restless generation of investors who are taking risks to charge Africa.
It’s a story that breezes through the wind turbines in South Africa to the landfills in Ghana to the underground heat of Kenya.
Some old heads, like nuclear physicist Kelvin Kemm, say that nuclear may yet have a bigger say. He believes three quarters of African countries can become nuclear within the next six years.
It all adds up to an exhilarating story of youth, vision, risk and reward. This month, FORBES AFRICA dedicates our cover story to it.

Tag: Eskom

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