Exclusive interview with Dr Marcus Cornaro, EU Ambassador to South Africa. The EU pavilion at this year’s African Utility Week will host 15 SMEs that are beneficiaries of the European Commission’s SME Instrument Programme, specially selected for their outstanding excellence in innovation, as well as employment and business creation potential.
“Given that SMEs contribute disproportionately to boosting job creation, GDP, and exports, African Utility Week should address such constraints by bringing all stakeholders together. The EU is certainly one of them”.
Let’s start with some background on the EU Commission’s involvement in the energy and water sectors on the continent and in South Africa?
The European Union’s involvement in Africa’s energy and water sectors, as well as its related policy agenda, are guided by initiatives including the launch of Sustainable Energy for All (2011); its adoption of the Sustainable Development Goals (2015) and its commitment to the Paris Agreement (2015).
This means the EU is ready to support broader access to energy and water and facilitate development partners’ energy transition efforts. This was underlined by sustainable energy having been prominent on the Africa-EU Summit agenda (2017) and the EU subsequently reaffirming its commitment to the African Renewable Energy Initiative (2018). We have also launched the EU External Investment Plan, which will support investments in sustainable energy and facilitate SMMEs financing. The involvement of the private sector is crucial as estimated cost of the universal energy access is in the region of €1 trillion by 2030.
Any specific projects that you are involved in and particularly excited about?
Staying with the key role of the private sector, but more narrowly focussing on South Africa, I have to commend the involvement of European companies and Development Finance Institutions (DFIs) in the country’s important Renewable Energy Independent Power Producers Programme and their positive contribution to localisation and employment in the sector.
We encourage private sector participation in a number of sectors, including energy and water, through a number of blending instruments.
The EU-funded Infrastructure Investment Programme for South Africa, managed by the Development Bank of Southern Africa, is supporting infrastructure projects in sustainable energy, transport, waste and water sectors by blending grants from the European Commission with the loans from DFIs. For example, the uMhlathuze Project encourages water reuse in the coal industry where presently a wasteful eight million litres are consumed daily to process and wash coal.
The EU Electrification Financing Initiative (ElectriFi) unlocks, accelerates and leverages investments to provide access to affordable, reliable, sustainable and modern energy in Africa and beyond.
At government level, EU funding has facilitated both the South African National Energy Development Institute’s development of the National Smart Grid Strategic Vision, as well as the deployment of clean energy technology solutions in municipal waterworks.
What in your view are the main challenges in the energy and water sectors in South Africa?
Drought-affected Cape Town is a prime example of how water resource management has become one of the global challenges of the 21st century. With limited water resources, and a population of around 55 million people, South Africa faces difficult economic and social choices as the agricultural, mining and power-generation sectors, not to mention the ever-increasing household consumption due to urbanisation, compete for limited water resources. Climate change could very well exacerbate the challenges significantly. It can no longer be business as usual as the linkages between water and energy, water and food security, as well as water and industrialisation, need to be taken into account.
I make this point cognisant of the EU remaining South Africa’s biggest foreign investor by far (close to 75%). In South Africa, government, business, civil society will need to work together to attract significant new FDI to top up public and private investments and team up with international partners in pursuit of technology transfer to deal with the country’s energy and water challenges.
Stepping for a moment into prospective foreign investors’ shoes, policy certainty in the energy sector is the key issue to be addressed. The recent signature of the much-delayed Power Purchase Agreements with Independent Power Producers is a welcome step forward, but investors also expect to receive greater clarity on the future energy mix and government’s plans for the new bidding rounds in the renewable energy sector.
In addition, power utility Eskom’s position as a vertically integrated monopoly does place a question mark over its sustainability and its commitment to renewable energy. Arguably there should be more room for competition. In the meantime, Eskom would have to resolve its financial liquidity issues as well as restore its internal operational capacity to provide reliable services that would also attract necessary FDI.
From the perspective of local entrepreneurs, access to finance does represent a challenge. This is the gap the EU has sought to close through its blending instruments.
On the issue of innovation and technology transfer, these are not so much of a challenge but a necessity in this day and age. We all need new and/or more affordable solutions in the clean energy and water sectors to help advance rural electrification and access to clean water, to achieve greater energy and water efficiency, and to ensure secure and sustainable supplies. In this context, I emphasise opportunities for research cooperation under the EU Horizon 2020 programme.
EU and African researchers have been already teaming up in multiple large-scale research projects, including on water efficiency in concentrated solar plants and on sustainable point-of-use water treatment technologies. Both of these are relevant for the Africa Utility Week. Further opportunities should be explored under the new calls for proposals.
I also make mention of an upcoming programme to support South Africa’s National System of Innovation, which has a component on the viability of innovation and/or specific technologies for service delivery with the involvement of the private sector.
How important are small to medium size companies to grow the sectors? How is the EU supporting this?
SMEs are the backbone of Europe’s economy. They represent 99% of all businesses in the EU and have created around 85% of the new jobs in the past five years. The European Commission has multiple initiatives to nurture SMEs, underlined by the Small Business Act for Europe. One example is the EU SME Instrument, which helps to scale up business ideas of young and innovative companies and start-ups. The SME Instrument has, in fact, supported the participation of 15 European companies at this year’s Africa Utility Week.
Another notable initiative is the Enterprise Europe Network, which helps entrepreneurs to access market information and find potential business partners. There is in fact a possibility to establish a South African node of the EEN, which would work to connect European and South African business partners. We hope the Departments of Trade and Industry and Small Business Development as well as Invest SA One-Stop-Shop can recognise the potential and seek to establish the node in the near future.
In addition we extend our SMEs’ support efforts beyond South Africa’s borders. While in the country earlier this month, Development Commissioner Mimica launched the €52 million Employment Promotion through SMME’s Support Programme, which seeks to improve the regulatory environment for SMMEs, their competitiveness and access to finance in the sectors prioritised in the country’s Industrial Policy Action Plan, which include green industries.
Please tell us more about your activities at this year’s African Utility Week.
Our key activity at this year’s Africa Utility Week is the so-called EU Pavilion where 15 SMEs from Europe are exhibiting. As mentioned earlier, these companies are beneficiaries of the European Commission’s SME Instrument Programme. These companies have been selected in results of a highly competitive evaluation process based on their outstanding excellence in innovation as well as employment and business creation potential.
At the Africa Utility Week these companies are presenting great innovations that would potentially provide excellent solutions for the African market. They are looking for partners in Africa: sales distributors, public procures, legal partners, press contacts, experts, investors, direct customers etc. I encourage participants to visit the EU pavilion and sincerely hope that there would be a number of business deals concluded.
What will be your message at the event?
My message is three-fold.
First, recent World Bank investment climate surveys find that the top two constraints for small and medium enterprises (SMEs) in Africa are access to finance and access to energy. Given that SMEs contribute disproportionately to boosting job creation, GDP, and exports, the African Utility Week should contribute to addressing such constraints by bringing all stakeholders together. The EU is certainly one of them.
Second, as we witness disruptive advances in the energy and water sector across the globe, pro-actively pursuing innovation, including through business partnerships and cooperation in research, remains key.
Third, strong leadership and citizenry participation at national, regional, continental and global levels determine the ability to leap frog in the development of sustainable energy and water sectors. European Union and Africa are no exceptions.
Read Dr Cornaro’s full bio.