The recent changes in the South African energy ministry, pending finalisation of the integrated resource plan and policy uncertainty are some of the factors stifling investment in energy, according to Dentons law firm chief executive, Noor Kapdi.
The Department of Energy is currently updating the integrated resource plan (IRP) and the integrated energy plan (IEP). The IRP guides the government’s plan for electricity provision within the energy mix, while the IEP provides a roadmap of the future energy landscape for South Africa, which guides future energy infrastructure investments and policy development.
Speaking in Parliament yesterday, Energy Minister David Mahlobo said the Department of Energy was currently consolidating comments on the IRP and would make submissions to the cabinet early next month.
Kapdi said South Africa’s energy sector would remain in a static state until regulatory and political stability returned.
“Energy infrastructure requires long-term investment, and so is particularly dependent on investors’ confidence in the country’s stability, and the forward trajectory of its economy. Unfortunately, South Africa is ticking neither of those boxes at the moment.
Not finalised
“With three energy ministers in the past year, integrated and energy resource plans that are not finalised and overall policy uncertainty, our energy sector is not an investment magnet,” he said.
He said policy uncertainty, particularly as regards the energy mix, was particularly counter-productive, because it deterred investors who might be willing to assume greater risk. There was no certainty regarding the relative importance of nuclear, solar, wind, coal and gas in energy account.
“No investor will commit capital to a project whose inclusion in the national energy strategy is doubtful or uncertain. The effects of this failure to provide a confirmed energy strategy can be seen in the lacklustre investor interest in the proposed gas pipeline from the Mozambican offshore fields and shale gas exploration in the Karoo,” he said.
He said the state of disarray at most state-owned companies was a further drag on investment. He cited Eskom’s current excess electricity capacity and oscillating attitude towards renewable energy sources.
“Another is the delay and uncertainty related to the contribution of natural gas to the energy mix and economy,” he said.