South Africa’s energy crisis will require investment, both from the private and public sector, of an estimated R1.2 trillion until 2030, according to Rand Merchant Bank’s (RMB’s) CEO Emrie Brown.
African government energy leaders spoke of the continent’s vast untapped naturally endowed reserves of fossil fuels to investors at the Green Energy Africa Summit in Cape Town this week, an event that drew some 1500 delegates and 50 African ministers and government representatives.
Brown said private power is booming in South Africa, and international investors are being attracted by Africa’s renewable energy opportunities.
An argument for increased investment in the continent’s oil and gas reserves was succinctly put by CEF Group CEO Dr Ishmael Poolo, who quoted the International Energy Agency says in its Africa Energy Outlook, 2022 report: “Oil and gas present an opportunity for the African continent to catch up with economic development, which will result in the continent’s green house gas emissions increasing from the current 3% to a mere 3.5% of global emissions.”
Poolo said the upside to the continued use of oil and gas by Africa by far outweighs the risk to climate change, but instead the country was still being chastised for its use of its natural resources.
In South Africa, Brown said there is already a fast-growing trend for metros and private companies to generate their own power, or to source it from third parties, as power opportunities expand beyond the traditional state utility, Eskom.
Other announcements this week bore testimony to the trends that Brown identified. The Shoprite Group, Africa’s biggest retail group, said it had increased its installed capacity of solar photovoltaic (PV) systems by 82% to 26 606kWp (peak load) over the past 12 months, with its combined 62 sites of solar panels equivalent in size to 20 soccer fields.
The state-owned Industrial Development Corporation said its investments in renewable energy helped add 900MW of power to the national grid and in the process created about 7 095 jobs spread across the Northern Cape, Western Cape, North West and Eastern Cape.
Meanwhile, Anglo American announced it will establish a new renewable energy business in South Africa with France-based renewable energy leader Électricité de France (EDF), called Envusa Energy, which would develop a pipeline of more than 600MW of wind and solar projects, a first step towards the development of an ecosystem that could generate three to five gigawatts (GW) of renewable energy by 2030.
Brown said financial institutions such as RMB were seeing value in funding independent power initiatives, as opposed to the growing number of financial institutions, locally and abroad, that are becoming increasingly reluctant to fund new fossil fuel burning projects.
Brown said South Africa’s current energy shortfall is estimated at around 6 000MW, but balloons to around 15 000MW if one takes into account Eskom breakdowns, and its plans to retire power stations at end of life.
RMB estimates that over the next three years, R133 billion to R177.4bn will be required to fund the government’s renewable energy programme alone.
She said the bank believes such programmes are highly bankable, however, and will be funded by 80% to 85% of debt.
Andries Rossouw, PwC’s Africa Energy, Utilities and Resources Leader, said energy poverty and transitioning to green energy will be unaffordable to Africa if it is left to self-fund and forced to forfeit its fossil fuel endowment — or to phase down its fossil fuel sectors under global policy and market pressure.
“The developed world needs to support Africa’s energy growth as part of its just transition commitment. Although it has made significant commitments to climate reparations for Africa, the speed and scale of execution remains insufficient.”
Brown said increased activity under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), the risk-mitigation IPP programme, and initiatives by municipalities such as Cape Town, eThekweni and Johannesburg to set up their own power-generation programmes, are encouraging.
“These initiatives … they’re a critical part of our energy transition,” she said.
Brown said based on deal-flow, RMB estimates that the funding required for private power projects in the next two to three years will be at least R49.8bn.
UK trade commissioner for Africa John Humphreys agreed that renewables in Africa represent a significant investment opportunity for international, as well as domestic companies.
“Renewables are bringing down the overall cost of energy, and making business more efficient, which makes it an increasingly attractive investment.”
He said only a fraction of Africa’s energy potential was currently being exploited – in areas such as hydropower, solar, biomass, wind and geothermal energy.
“Domestic and international capital must be mobilised for innovative financing in Africa's energy sector, with a focus on renewable energy. Electrification efforts need to be open to private-sector investment and innovations, such as solar energy and battery storage, which have made a tremendous impact in enabling access for millions of poor and underserved households,” he said.
Brown said the challenge of Africa’s energy transition was twofold: managing the risks to vulnerable communities directly impacted by climate change, while at the same time supporting the people whose lives are inextricably linked to the fossil fuel industry, and for whom that transition represents a direct threat to their livelihoods.
GEAS vice-president of Energy, Paul Sinclair said: “This event is all about enabling investment into new energy projects, providing energy access and shaping the future of Africa.”
EIT Climate-KIC, the EU’s climate innovation initiative working to accelerate the transition to a zero-carbon society, and research firm Briter Bridges, said that between 2014 and the first quarter of 2022, climate tech start-ups in Africa raised just over $2.1 billion in disclosed funding, with renewables emerging as the top funded in terms of deal volumes, receiving 75% of the disclosed funding.
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