HomeIndustry SectorsGenerationMcKinsey report identifies natural gas as a key economic driver

McKinsey report identifies natural gas as a key economic driver

McKinsey. gas pipeline
McKinsey has identified natural gas a key economic driver for the short to medium term

On Tuesday, the McKinsey Global Institute and the global management consultancy’s Johannesburg office, released a report that highlights the short to medium term achievable goals for South Africa, which could facilitate the country’s growth.

The McKinsey report adds that these attainable objectives could add an estimated one trillion rand to the country’s annual GDP by 2030, provide opportunities to transform the wider South African society and creating over 3.4 million jobs in the process.

McKinsey partner Christine Wu said in a company statement: “South Africa has made extraordinary progress in so many ways over the last 20 years, with a doubling of GDP, millions lifted from poverty and a fast-growing middle class.

“But a growing sense of pessimism pervades and the slowing of progress – our sluggish GDP growth since 2008 compared to the rest of the African continent, high unemployment and particularly high youth unemployment – has led to a general sense that South Africa is stuck in a low growth trap and its best days are behind us.”

Wu added: “But we argue in this new report that a focus on five areas could bring about a transformation adding a trillion rand to annual GDP by 2030 and create 3.4 million jobs.”

McKinsey report: optimal opportunity

According to the report, natural gas for power generation and industrial development is one of the top feasible short to medium term opportunities.

South Africa’s current electricity shortage has hindered the country’s growth and development and another shortfall is predicted between 2025 and 2030.

McKinsey said in a statement: “Natural gas plants—which are fast to build, entail low capital costs, and have a low carbon footprint—can provide an alternative to diversify the power supply.

“With the necessary regulatory certainty, we estimate that South Africa could install up to 20GW of gas-fired power plants to diversify base-load capacity by 2030. Gas can be provided through imports, local shale gas resources (if proven), or both.”

Opportunity for growth

In addition to natural gas, the report identified four additional drivers of short to medium term growth including:

  • creating a globally competitive hub in advanced manufacturing
  • making infrastructure investment more productive to enable growth across the economy
  • boosting exports of services to the rest of Africa and the world
  • unlocking South Africa’s full agricultural production and processing potential

According to McKinsey, all five drivers “are mutually reinforcing, in that, each of the identified opportunities will contribute both to GDP growth and job creation, and their successful implementation will benefit many other sectors of the South African economy.”

MGI Director Acha Leke said: “Implementing the recommendations of this report and realising the enormous promise of South Africa represents a huge challenge today.

“Uppermost is the clear requirement that government and business must find new ways to work together, not least in transforming the South African skills system to ensure it is truly demand led and the future workforce is employment ready to meet the needs of the high growth industries we outline in the report.”

Ashley Theron
Ashley Theron-Ord is based in Cape Town, South Africa at Clarion Events-Africa. She is the Senior Content Producer across media brands including ESI Africa, Smart Energy International, Power Engineering International and Mining Review Africa.