President Cyril Ramaphosa’s announcement on 10 June about new rules of engagement on the energy front in South Africa is good for investment sentiment.
Prof Raymond Parsons, an economist from the Business School of the North-West University, says the more liberal approach to energy supply comes at a time when the country needs to take full advantage of the current economic recovery.
“The latest steps to encourage private-sector investment in an embedded generation are imperative to reduce the continued high cost of load-shedding to the South African economy, and remove the serious ceiling that it has for years placed on the country’s economic performance.”
Prof Parsons says while this intervention today will not offer immediate relief to load-shedding, it helps to lay a solid foundation for future power security.
According to him the government now recognises the extent to which the failure of Eskom to guarantee electricity supply has posed the most serious risks to the South African economy.
“The right solutions have for some time required much more flexible energy policies. The increased flexibility now given to the electricity generation licensing threshold by raising it to 100 MW is, therefore, an upside surprise, which is potentially favourable for investment and growth.”
He says the encouragement of multiple sources of energy supply may begin to signal an amelioration of the long-standing energy crisis in South Africa, which has hampered the economy.
“Therefore, the emphasis by President Ramaphosa on the need for the measures announced today to be efficiently and effectively implemented – as well to comply with certain timelines – is necessary and welcome.”
According to Prof Parsons, this will also require that the necessary capacity exists in NERSA, at the local government level and among other key decision-makers to expedite the new decisions needed to boost energy security in South Africa.
“What is needed, is ‘smart tape’, not ‘red tape’, to achieve these goals. If speedily and well implemented, the changing of the ‘rules of engagement’ on the energy front has the potential to make a big difference.”
