JOHANNESBURG – FTI Consulting's Future of South Africa report released yesterday called on the government to update and reinvigorate the Integrated Resource Plan (IRP) to plan and support the transition to renewables, while ensuring that supporting Eskom’s debt did not divert funds from other areas of the economy.
The report said South Africa’s leadership must have the courage to stay the course to solve Eskom’s issues and build buy-in from those who are defensive to change.
The government is in the process of breaking Eskom into three separate entities, which will deal with generation, transmission and distribution under Eskom Holdings.
Colin Coleman, the chief executive of Goldman Sachs for sub-Saharan Africa, said he does not favour the unbundling of Eskom.
“We have a crisis that cannot wait three or four years of market restructuring. As we’ve seen from overseas markets, you need real transactional capabilities to unbundle even less complicated structures than Eskom successfully,” Coleman said.
“My bias is for a vertically integrated entity. Nothing replaces good management, independent of the market structure, in a crisis.”
The power utility is faced with a mammoth R420 billion debt.
After several delays, the draft IRP 2019, updated by the Department of Energy to incorporate the comments arising from the public participation process, which closed in October, was finally submitted to Nedlac last month.
Energy expert Tobias Bischof-Niemz said the IRP was not only an energy mix plan, but a blueprint for investment.
“It demonstrates how the transition to a more renewable energy mix will look from a central planning point of view.
“If you know which coal-fired power stations will shut down and in what year, for example, you can utilise the market components to steer new investment to soften any negative impacts on jobs,” Bischof-Niemz said.
The Future of SA report further found that wind and solar photovoltaic were now the cheapest forms of power generation per kilowatt hour (kWh) and estimated the cost of renewables to fall still further in the future.
Lungisa Fuzile, the chief executive of Standard Bank South Africa, said the energy sector - especially renewables - had proved a magnet for investment.
“Round after round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has been fully subscribed, demonstrating that not only is there interest by foreign investors, but that there is a willingness to commit to investments with long return horizons,” Fuzile said.
The FTI report also encouraged South Africa to create policy certainty, developing skills and jobs for now and the future, improve investment attractiveness and encourage industrialisation to grow the economy and create jobs.
Petrus Marais, the head of the South Africa Practice at FTI Consulting, said the country faced a watershed moment.
“Against the backdrop of political uncertainty, subdued economic growth and major challenges such as unemployment and an energy crisis, our country faces a choice.
“This choice - between a high road to sustainable growth and prosperity or a low road to slow economic erosion - will determine the future of South Africa for generations to come.”