Wide-ranging plan could be tipping point for energy challenges

President Cyril Ramaphosa’s plan to resolve the long-standing electricity crisis in South Africa could be the tipping point in turning around the country’s ability to more successfully meet its energy challenges.

Prof Raymond Parsons, economist from the Business School of the North-West University (NWU), says the president’s important statement has acknowledged the extent to which load-shedding and the lack of power security have inflicted severe economic damage on South Africa. Load-shedding and the lack of power security have become the biggest single threat to the country’s economic performance, and demand urgent further attention.

“If it is properly and rapidly implemented, the latest wide-ranging plan of action to address South Africa’s chronic electricity crisis could now be a tipping point in turning around the country’s ability to more successfully meet its energy challenges. This has now become imperative for investment and job-rich growth in the economy.”

According to Prof Parsons, it remains essential for the sense of urgency conveyed in President Ramaphosa’s announcement on 25 July to be translated into effective collaboration at all levels to achieve the necessary outcomes.

“The official intentions, such as to reduce red tape and to expedite decision-making, to recruit available experienced technical skills, and to mobilise the private sector on a much larger scale, are all essential steps that key stakeholders must now reinforce. It would have been helpful if more specific timelines for certain projects and outcomes had been set out in the latest plan.”

Prof Parsons says a stabilised and capacitated Eskom obviously remains a key player in the domestic energy market. “To close the ‘electricity gap’ in South Africa on a sustainable basis requires the economy to reduce its dependence on the Eskom monopoly. The participation of the business sector and the inclusion of individual effort on a much larger scale are in line with best global practice.”

According to Prof Parsons, the present plans still seem to fall short of the previous commitment that 30% of the electricity grid should eventually be in the private sector. It is welcome that the Integrated Resource Plan is now to be revised and updated to capture new developments.

He concludes that at the macro level the latest plan to expedite solutions to the electricity crisis in South Africa could help to underpin the nascent recovery in private fixed-capital formation that has become apparent in recent months.

“Lack of security in power supply has for long been cited as a major factor inhibiting a more rapid and sustainable growth in private investment. If tangible outcomes from the latest electricity plan soon manifest themselves, it could boost investor confidence in ways that could significantly raise private fixed-capital formation as a percentage of gross domestic product (GDP) growth in the years ahead.”

Submitted on Tue, 07/26/2022 - 10:05