South Africa must obsess over megawatts — forget the distractions

The South African government should be obsessed with adding more generating capacity to the power grid rather than fixating on localisation, according to the CEO of Rand Merchant Bank, James Formby.

Speaking to the Sunday Times, Formby said the biggest threat to South Africa’s economic growth is its lack of electricity.

Emphasis on localisation adds unnecessary costs and complications to renewable power projects.

“We all know that economic growth creates jobs, so obsessing about adding megawatts to the grid should be a collective priority across business, government, and labour,” the paper quoted Formby as saying.

He added that South Africa should ensure there is nothing in the way of adding megawatts to the grid.

Formby explained that localisation causes doubt when bidders want certainty to close their bids quickly.

“The priority right now should be megawatts on the grid, growing the economy and creating jobs, he says, not localisation,” he added.

Eskom executives have repeatedly stated that the power utility had a shortfall of 6,000MW of generating capacity.

In April, Eskom CEO André de Ruyter said the state-owned utility was scrutinising contracts to buy power from private producers.

However, since the fourth bid window in 2015, not one renewable energy project has reached financial close through the government’s independent power producer procurement programme (IPPPP).

James Formby, CEO at Rand Merchant Bank

According to Formby, however, there is a pipeline of projects approaching the final approval and construction phase. It is critical that these approvals be fast-tracked.

He added that there is a lot of investor interest — both locally and internationally — surrounding the IPPPP bid windows, meaning the constraints are not financial.

One of the barriers to the government’s localisation plans is that it requires skills that the country doesn’t have, and the Department of Home Affairs is making it difficult to attract such skills.

Formby believes that the government should prioritise closing fifth bid windows as quickly as possible, but localisation rules are hindering its progress.

He also highlighted one of the critical downfalls that load-shedding has on South Africa’s economy. Not only does it impact growth, but it also lowers investor confidence.

Formby added that South Africa should aim to get its economic growth to a minimum of 3% as quickly as possible and prevent the country from falling back into the 1.7% to 2% range.

Yesterday, Eskom announced that South Africans should expect load-shedding every day during the evening peaks between 17:00 and 22:00 in the coming week.

Earlier in the week, Eskom COO Jan Oberholzer revealed that the utility is close to concluding agreements to provide around 1.4GWh of battery energy storage.

These batteries will be installed at Eskom substations and renewable energy power stations.

They form part of Eskom’s flagship battery energy storage system, covering 90 sites in the coastal provinces of the Western Cape, Northern Cape, Eastern Cape, and KwaZulu-Natal.


Now read: Eskom load-shedding for Saturday evening — with more likely next week

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South Africa must obsess over megawatts — forget the distractions