Elias Masilela, CEO of the Public Investment Corporation (PIC), has announced plans to explore investment into shale gas projects in South Africa, and development of the Grand Inga hydropower project, it has been announced. With $152 billion under management, PIC is the continent’s largest money manager.
“We have taken the decision that we will play the lead in the energy space,” Masilela told reporters at a briefing. “Energy is one of the biggest barriers for the continent and if we don’t deal with it it is going to deal with us.”
The PIC’s focus on energy comes as South Africa explores developing shale projects in its arid Karoo area and attempts to develop the Inga hydropower complex on the Congo River are revived.
The PIC, which mostly manages South African state workers’ pensions, is the biggest shareholder in Johannesburg-based Sasol Ltd. (SOL), the world’s largest fuel-from-coal producer, as well as SacOil Holding Ltd. (SCL) and Camac Energy Inc. (CME), oil explorers listed on South Africa’s stock exchange.
if “it makes commercial and sustainability sense,” PIC will probably invest in shale, which has the potential to transform South African energy supply, Masilela said.
Opponents of hydraulic fracturing, which blasts water, chemicals and sand into rock to release gas, say it risks contaminating ground water.
However, South Africa’s President Jacob Zuma has supported shale-gas drilling in the semi-arid Karoo region that’s the center of South Africa’s sheep-farming industry. Explorers, including Royal Dutch Shell Plc (RDSA), hope to tap as much as 390 trillion cubic feet of gas resources, the eighth-biggest in the world, according to the U.S. Energy Information Administration.
Nearly half the economies in sub-Saharan Africa are still held back by frequent power-cuts even though the continent is well-endowed with fossil fuels and renewable energy resources, according to the World Bank.
The African Development Bank is trying to put together a group of investors, including the Overseas Private Investment Corp., the U.S. development finance institution, and the U.S. Agency for International Development to fund Democratic Republic of Congo’s $12 billion Inga 3 hydropower project on the Congo River, Masilela said.
“We’d be interested, but at the right level,” he said. “There’s no way a single investor could handle Inga. It’s too big, too many risks and it would rely to a large extent on political diplomacy.”
The World Bank is in “active negotiations” with the U.S. government to support the Inga project, which could offer 4,800 megawatts of power to southern Africa by the beginning of the next decade, bank President Jim Yong Kim said on April 1. The complex, which lies on the world’s second-biggest river by volume after the Amazon, could eventually produce 50,000 megawatts, he said.
The DRC is currently considering three groups of companies from Spain, China and Korea to begin construction by October 2015. The government has said it would welcome other companies that wish to join the project.
While more than two decades of failed starts on the Inga complex is an “overwhelming” legacy to overcome, Masilela said the project may happen now.
“The U.S. has invested dedicated resources towards this, both commercially and diplomatically,” Masilela said. “You can tell that the political capital is now behind the project. It’s like every head of state understands the benefits of this project and of completing it.”
PIC has about 93 percent of its assets in South Africa and invests about 55 percent of assets in listed equities, 35 percent in debt and 5 percent in property. Developmental investments have been allocated 5 percent. Of its total investments, the PIC has 2 percent invested in the rest of Africa and 5 percent outside the continent.
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