South Africa is considering public-private partnerships to build energy infrastructure, South Africa’s finance minister Nhlanhla Nene said yesterday in an interview with Bloomberg.

Mr Nene said South Africa is open to private investors helping to finance power plants built by Eskom Holdings to plug a funding gap faced by the state power utility.

Commenting on how the government may give Eskom new debt guarantees or convert subordinated loans into equity, Nene hinted at a new relationship with private investors: “There is also the issue of trying to see whether the extension of some of the infrastructure build program can’t be taken up jointly in partnerships with the private sector,” he said. “We think it is worth considering that.”

No cash flow

The government may have no option than to seek private funding to address electricity-supply constraints, said Anton Eberhard, a professor at University of Cape Town’s Graduate School of Business.

Mr Eberhard told Bloomberg: “They can’t raise more debt because they don’t have the cash flow. “So the issue then is going back to the shareholder for more equity and that’s on the cards, it’s been discussed, but there’s very little wiggle room there because of the fiscal constraints faced by National Treasury.”

Anne Fruhauf, southern Africa analyst at New York-based risk adviser Teneo Intelligence, agrees. “Partial privatization, perhaps under another name, is an increasing possibility, not because it is an ANC priority but because it is becoming a financial necessity.”

No to privatisation

The possibility of private investment in a national utility has met with resistance from the Congress of South African Trade Unions, the country’s largest labor grouping and an ally of the ruling African National Congress, which has said it will oppose Eskom’s privatization. “We remain opposed to privatization and public-private partnerships,” Patrick Craven, a spokesman for the labour federation.

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