HomeIndustry SectorsFinance and PolicyEnergy investment and the South Africa’s state of the nation (SONA)

Energy investment and the South Africa’s state of the nation (SONA)

By Johan Muller, programme manager for energy and environment at growth consulting firm, Frost & Sullivan

Several energy-related themes were mentioned during the 2014 State of the Nation Address (SONA) by South African president Jacob Zuma. These themes included: the “radical” transformation of South Africa’s energy mix, structural changes applied to public sector entities to assist them with addressing energy challenges, a commitment towards developing two very controversial options; namely, nuclear and shale gas; and then also touching on energy imports, Eskom, the Independent System and Market Operator (ISMO) bill and Coal 3.

Due to the nature of the SONA, details into country challenges are often overlooked. It is by definition a high level document indicating certain trends that will be focused on over the short to medium term. However, what does raise a red flag is the message being sent to potential overseas investors, directly and indirectly, the local manufacturing markets and service providers. With such a strong emphasis on the development of coal, nuclear, and shale gas, several issues need resolution; namely where does the proposed carbon tax still fit in, why the strong emphasis on nuclear, should renewable energies not play a larger part in the energy mix, and is there more room for privatisation in the energy landscape?

All in all, the SONA touches on a few valid points such as the structural reforms, and the fact that the challenges at Eskom need to be addressed urgently. The SONA, however, was very vague – it did not further explain or provide policy certainty, which is desperately needed to attract foreign direct investment into South Africa. The new minister of energy, Tina Joemat Pettersson, has a mountain to climb, and it is suggested that adequate support urgently be provided to her to efficiently perform her role. This support will translate into a message of political and economic stability sent to the rest of the investing world.

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Energy investment and the South Africa’s state of the nation (SONA)