HomeIndustry SectorsEnergy EfficiencyInvestors being lured by promise of 'cheap electricity'

Investors being lured by promise of ‘cheap electricity’

6 February 2008 – The South Africa government, despite the desperate lack of electricity in the country, is pursuing a scheme to lure investors to South Africa with the promise of cheap electricity.


Minister of minerals and energy,
Buyelwa Sonjica

According to a news report published in the Business Day newspaper, consumers will "subsidise cheaper power for beneficiaries of the scheme through higher tariffs, and will also be rationed to free up supply for new users.

"The commitment to reallocate power is probably an attempt to reassure new investors that they will get electricity but it also seems to be a scramble to prevent Eskom from paying penalties to investors for breach of contract," the report continued.

The minister of minerals and energy, Buyelwa Sonjica confirmed  at the launch of the national energy efficiency campaign, that the government would continue with "the developmental electricity pricing (DEPP)", saying South Africa needed to attract investors.

The minister estimated that 5 669MW could be saved by household consumers and that state has set a savings target of between 15% – 20% for domestic and industrial consumers.

Failure by domestic customers to comply with efficiency measures would incur penalties from 2009 said Nelisiwe Magubane, department of minerals and energy deputy director-general for electricity and nuclear power. Industrial and corporate users may face immediate penalties if their usage exceeds a pre-determined target. This pre-determined target is based on an average consumption figure over the last 12 months.

Any energy saved through rationing will be passed on to new investors under the DEPP, she said.

Rates under the DEPP are thought to be lower than those being paid by existing industrial consumers. Alcan Rio Tinto have recently benefited from the promise of cheaper electricity with their planned development at the Coega industrial development zone.

DEPP does however mean that the government is promoting South Africa as an investment destination with cheap power, even as current supplies become more and more scarce.

According to economist, Matthew Stern, DEPP is an insult to consumers "because they were expected to pay more for power and use less of it while the state refused to divulge pricing agreements with preferred consumers."

Nimrod Zalk of the department of trade and industry said the department was awaiting clarification on the status of DEPP from the department of public enterprises. However, he said that contractual commitments would not all the programme to be revisited "retrospectively".