On Tuesday 21 July, the South African department of mineral resources and energy delivered its first budget speech since the merger of these two ministries.
Originally published in the ESI Africa weekly newsletter on 15/07/2020
Apart from the economic impact from the pandemic, mining – the heart of the country’s economy and an energy-intensive sector – is reported to be in a downward spiral for at least six years. It’s a trend that is changing the landscape for the country’s GDP and energy demand profile that can no longer be ignored by the government.
The minister’s speech somewhat acknowledged this, stating that with the widening budget deficit the fiscus is severely constrained. “To stimulate growth in the economy, and alleviate pressure on the fiscus, Government should mobilise the private sector for infrastructure development.”
Does this mark the point at which history will mark South Africa’s energy transition?
Perhaps it is; as the department’s positive reception of renewable energy is noted in this comment: “We continue to leverage on the work of the Independent Power Producers Procurement Programme (IPPPP), which demonstrates that both private and public sector funds can contribute to infrastructure investments.”
The good news is that these IPP projects, which were signed under REIPPP programme bid window 4, have resumed construction of their power plants during Level 3 of the lockdown.
In terms of policy, which is an absolute necessity to ensure market certainty, the budget speech unpacked how it will strengthen the regulatory framework and mobilise funding for the development of infrastructure.
However, as important as regulatory frameworks are in supporting market growth, the tide has turned. We have seen the commercial and industrial (C&I) energy demand market maturing in the last few years.
The dominant C&I model being the direct purchase of renewable energy or hybrid solutions to support their need for reliable and affordable power—along with some using the investment to reduce their carbon footprint.
However, to manage the risks of such projects, financing options for C&Is now include PPAs, rental and leasing. It’s a topic we will unpack with JinkoSolar on 27 July at 12h00 GMT; you’re invited to join us.
On the whole, the budget speech was very detailed and we will unpack this in further articles online.
Sadly, the budget was delivered during a trying time as Minister Kubayi-Ngubane stood in for Minister Gwede Mantashe who has been hospitalised, having tested positive for COVID-19. The ESI Africa team wishes the minister, his spouse, and all those affected a speedy recovery. Our hearts go out to those who have lost a loved one.
Until next week.