Johannesburg - African countries should consider developing local currency pools of liquidity and reduce reliance on external funding, which is usually in hard currencies, such as the US dollar, according to Standard Bank head of power, Rentia van Tonder.
Van Tonder said yesterday that several African countries were investing in power infrastructure often with constrained budgets against the backdrop of relatively low access to reliable energy.
She said creating local currency pools could unlock a number of smaller power projects in Africa, arguing that the “currency gap” heightened the risk of default when currencies fell. She said Standard Bank saw numerous opportunities in rural electrification in Africa, but the investment required robust risk mitigation strategies.
“The slowdown in (the global) economy has impacted on various (African) economies and power projects,” Van Tonder said. She has advocated a mix of funding mechanisms, with development finance institutions and export credit agencies playing an important role in financing power projects.
Commenting on Standard Bank’s experience in the different African countries following the plunge in commodity prices, Van Tonder said: “We look at power projects in Africa on a case by case basis. It remains important to have a well-structured project in a changing environment. How to find the right funding mix with relevant risk mitigating structures.”
She said the bank was eyeing opportunities in various countries and one example, in Nigeria, was the roll-out of rural electrification. “Nigeria is a market that we are interested in for off-grid solutions,” Van Tonder said. She said off-grid power solutions in Africa were historically small and relied on donor funding or equity. But as the scale of these increased, there would be an opportunity for commercial banks as well, she said.
In South Africa, Standard Bank was also keen on the mooted independent power producer gas-to-power programme. The government intends to procure 3 126 megawatts through the programme.
Memorandum
She said the bank was, however, waiting for details on the programme. Energy Minister Tina Joemat-Pettersson said earlier this year that the department would issue the information memorandum in the second quarter of the 2016/17 financial year, before commencing with formal procurement later this year.
The government has said that the gas-to-power programme will result in a R64 billion investment in port, pipeline, generation and transmission infrastructure in Richards Bay, Coega and Saldanha Bay.
According to Joemat-Pettersson, the gas-to-power programme will demonstrate the government’s commitment to the establishment of a natural gas industry in South Africa.
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