by Crescencia Chifamba | Mar 3, 2022 | Blog
Finance Minister Enoch Godongwana has stated that Eskom’s debt problem requires “fiscal intervention” and there is a need for the state-owned entity to meet certain conditions [1]. Over the past decade, Eskom has accumulated a staggering debt of R392-billion, resulting in Eskom’s failure to maintain its aging coal-fired power stations and 14 years of load-shedding, thereby hindering South Africa’s economic growth rate [2]. For more than a decade, the South African government has spent time fixing Eskom instead of fixing the electricity supply problem.
To date, Eskom has been provided with R136-billion to pay off its debt with a further R88-billion until 2025/26. But what does this dependency syndrome mean for SMMEs? Are we going to continue singing the same chorus? This is not the first time the South African government comes to Eskom’s rescue, and it is likely not the last. And yet SMMEs continue to struggle to operate due to the problems at Eskom.
SMMEs are the backbone of the South African economy – they provide the majority of job opportunities and contribute significantly to the GDP. To resolve the current high rate of unemployment, decrease inequalities and alleviate poverty, there is a need to create a sustainable and supportive environment that supports the growth, development and sustainability of SMMEs. However, the uncertainty of Eskom’s electricity supply makes it difficult for businesses to operate effectively and efficiently.
While the allocation of R88 billion is a positive step in reducing the current Eskom debt, it does not necessarily mean that Eskom will change the way in which its operations are handled. If it is business as usual for Eskom, then we are bound to experience load shedding again. Most small business owners cannot afford to purchase generators to keep the lights on during rolling blackouts. For most SMMEs, two or three hours without electricity negatively impacts the operations of the business and thereby results in loss of revenue.
The “tough love” approach – as mentioned by the Finance Minister – can help ease the burden of load shedding. Once an entity stops relying on a bailout from the government, it tends to have improved operations and well-managed allocation of resources, which tends to enhance the reliability of the electricity supply. This is a clear indication that Eskom needs to take responsibility and take steps towards cost containment, sale of its assets, and implementing operational improvements to reduce some of the challenges which the entity is currently facing. Without these measures, there is a risk that Eskom will continue having rising overheads, budget overruns, corruption[3], and financing costs, further increasing its current debt. In turn, Eskom’s dependency syndrome will have a negative ripple effect on the growth, development, and sustainability of SMMEs.
In solving Eskom’s problems and promoting economic growth, some have promoted the notion that Eskom should be privatized. Will this work or not? Some believe that this will increase efficiency in the sector by introducing competition, while others think that this will increase the cost of electricity. How this will play out for SMMEs remains to be seen.
References
[1] Budget Speech. (2022). 2022/23 budget speech by Minister of Finance Enoch Godongwana. https://www.gov.za/speeches/minister-enoch-godonwana-2022-budget-speech-23-feb-2022-0000
[2] Derby, R.(2022). Budget 2022: Finance minister calls on Eskom to sell assets to solve its debt issues. https://mg.co.za/business/2022-02-23-budget-2022-finance-minister-calls-on-eskom-to-sell-assets-to-solve-its-debt-issues/
[3] Global Markets. (2020). Are Eskom’s Troubles Impacting The South African Economy? https://www.fxcm.com/za/insights/eskom-troubles-impacting-south-african-economy/
by Danae Govender | Oct 4, 2021 | Blog
My 27th birthday, this year, like last year’s 26th, was spent under lockdown. Unlike last year, however, the lockdown under which I found myself extended further than that related to the government’s response to the coronavirus pandemic. Instead, I was barricaded within the confines of my neighborhood as part of my community’s response to the July unrest which transpired in parts of KwaZulu-Natal and Gauteng.
In July 2021, South Africa experienced the worst bout of politically motivated uprisings since the advent of democracy. What began as a semi-peaceful demonstration outside the homestead of the former president, Jacob Zuma, quickly spiraled out of control, into all-out looting, arson, vandalism, and violence parade.
According to reports, the week of riots in South Africa could cost the country ZAR 50 billion in lost output, while approximately 150 000 jobs have been put at risk. Further casualties came in the form of approximately 150 000 informal traders and 40 000 businesses, 1 400 ATMs, 100 malls, 11 warehouses, and eight factories.[1] By July 18 it was reported that 3407 arrests were made and by August 3 it was reported that 342 lives were lost.[2],[3]
Although these actions were, initially, termed the “Free Zuma Protest”, it became apparent that additional elements were at play – those outside the strict realm of Zuma’s support base. We have since been informed that the unrests were part of an attempt to derail the state, orchestrated by a well-oiled machine that took advantage of the country’s constitution, made use of our nation’s criminal elements, and leveraged the desperation of the impoverished.[4]
While the meaningless destruction of property, intimidation of people, and incitement of violence cannot be excused, one would find themselves at a moral crossroad if they were to group together the poverty-stricken looters with the criminal elements behind July’s rampage. Undoubtedly, such a crossroad would arise when one considers that the participation of the desperate in the heinous activities, which led to the costs described above, could very well have been a side-effect of looting at a higher level – looting of the state.
It was this notion that quelled the disappointment of a birthday spent under an even harder lockdown than that imposed by the government. I found myself asking the question, how much anger could I have toward impoverished looters when the country’s (former) health minister, during a global health crisis, in a country with the deepest of inequalities, was found to have channeled ZAR 150 million of department funds to his cronies from which his family was shown to have benefitted or when a former member of the National Health Laboratory Services (NHLS) recently appeared in court for tender fraud?[5],[6] The answer was that I couldn’t hold any anger. Why? Because the actions of the impoverished looters were merely a reaction to the actions of some of our leaders.
This brings me to my conclusion. As we prepare to celebrate our 27th Heritage Day as a democratic nation, we must remember that among the brilliant myriad of cultures in South Africa, there exists a few which we are better off without. In this regard, that is a culture of corruption and heritage of looting.
[1] S’thembile Cele and Leah Wilson, ‘South Africa economy set to take $3.4 billion hit from riots’, Bloomberg, https://www.bloomberg.com/news/articles/2021-07-20/south-african-economy-set-to-take-3-4-billion-hit-from-riots
[2] Kyle Zeeman, ‘Three alleged instigators of violent unrest arrested and expected in court this week’, Timeslive, July 18, 2021, https://www.timeslive.co.za/news/2021-07-18-three-alleged-instigators-of-violent-unrest-arrested-and-expected-in-court-this-week/.
[3] Paddy Harper, ‘Phoenix killings: 22 suspects held’, Mail and Guardian, August 3, 2021, https://mg.co.za/news/2021-08-03-phoenix-killings-22-suspects-held/.
[4] Andrew Harding, ‘South Africa riots: The inside story of Durban’s week of anarchy’, BBC News, July 29, 2021, https://www.bbc.com/news/world-africa-57996373.
[5]Pieter-Louis Myburgh, ‘SIU flags ‘corrupt’ payment into Department of Health staffer’s bank account’, Daily Maverick, September 14, 2021, https://www.dailymaverick.co.za/article/2021-09-14-siu-flags-corrupt-payment-into-department-of-health-staffers-bank-account/
[6] ‘Former NHLS CEO charged in R113 million tender fraud case,’ SABC News, September 6, 2021, https://www.sabcnews.com/sabcnews/former-nhls-ceo-charged-in-r113-million-tender-fraud-case/.
by Kane Jules | Oct 4, 2021 | Blog
COVID-19 has been a catalyst for change across multiple dimensions through which human civilisations have come to function. Some of these could not have been anticipated before 2020; in many instances, however, the shock has accelerated processes that were already underway. In South Africa, concerns over the ability to hold free, fair, and safe elections have led to a long-running saga between the country’s Independent Electoral Commission (IEC) and competing interests within the polity. Ensuing contestations have been directed towards the country’s apex court, whose judgments have become increasingly sought for the interpretation of constitutional disputes.
The establishment of an independent body to manage elections has become an institutional norm of democracies. The body is designed to serve as an independent agency that regulates party and election finance and sets standards for how elections should be run. As an extension of the separation of powers – in which the judicial, legislative and the executive arms of the state carry out checks and balances, but do not interfere with the others’ functions – the purpose of the electoral commission is to provide the standards of impartiality which underscore the legitimacy of the democratic process. In South Africa, the IEC was established, along with several other institutions in terms of Chapter 9 of the Constitution, to guard democracy by making governments answerable and exerting co-operative control.
In a climate dominated by the imperative to mitigate the impact of the pandemic, the IEC has faced a dilemma over how to facilitate local government elections due to take place in 2021. Many countries have wrestled with the question of how best to enact their democratic process in the knowledge that it would require large-scale in-person participation of the electorate. Although many countries have opted to proceed and make accommodations – for example, by expanding online voter registration and ballot casting – the IEC took the view that postponement would be the best course of action and sought the approval of the Constitutional Court.
The IEC’s argument rested on the recommendations of the Moseneke Report, which proposed several adjustments to assist in reducing the potential for the transmission of COVID-19. These included extending voter registration, expanding special voting arrangements for the ill and vaccinations for poll workers. However, it also recommended that the local government elections due to take place in October 2021 be delayed until February 2022 – a date that would fall outside the 90-day window during which elections are required to be held from the expiry of the term of incumbent municipal councils. The case was supported by the ANC and some other parties, although it was opposed by others within the polity and broader civil society who maintained that the right of the electorate to remove underperforming municipal governments was more urgent than ever. On Friday 3rd September, the IEC’s application to postpone local government elections was ruled against by the Constitutional Court. The ConCourt added that elections must be held between 27th October and 1st November 2021, ordering Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini Zuma to proclaim a new date no later than 10th September.
Having followed the court’s ruling that elections were to go ahead by November 1st without delay, and that a voter registration weekend would need to be held, the IEC made a further announcement that the candidate nomination process would be re-opened for political parties. In its ruling, the Constitutional Court did not specifically order the re-opening of candidate registration, though it did state that amendments could be made to the election timetable where it is deemed “reasonably necessary”. With the ANC having failed to register candidates in 93 municipalities – despite parties having had the opportunity to nominate candidates by August 23rd – the IEC’s decision has added further fuel to the fire in the build up to the election.
On September 7th, the DA filed an urgent application to the Constitutional Court, asking them to set aside the IEC’s decision to re-open candidate registration. The application – which was subsequently given support from the EFF, representing an alliance between the two major opposition parties – asserts that the court’s allowance for “reasonably necessary” amendments caters for the re-opening of the voters roll in the context of the voter registration drive. In response to the implied allegation that the electoral commission’s decisions have favoured a particular political party, Mawethu Mosery, IEC Deputy Chief Electoral Officer, said, “The court has issued us direction in response to that application. We’ve agreed with the DA that the matter is urgent and we would wish that the court pronounces on it soonest, before the 20th of September. Our view is that we will oppose that, and we will give detailed reasons why we are opposing that and why we indicated that we are not favouring a particular political party.”
Although the outcome of the DA’s application remains unclear, the persistent attempts to challenge the IEC through the judiciary may cast further doubt over the impartiality of the electoral commission. On the other side of the coin, the DA have been targeted with accusations of attempting to usurp the IEC’s authority by returning to the apex court – a move that would breach the ‘separation of powers’ principle, according to Minister Dlamini Zuma. She argues that, by overruling the IEC’s decision to re-open candidate registration on the basis of the court’s previous order, the DA’s application would somehow rescind or constrain the powers of the electoral commission.
Time will tell whether these contestations yield a tangible effect on the authority of the IEC, and by extension, the validity of the country’s electoral process. With elections due to be held by November 1st, the likely outcome is that elections will take place as planned and allowances made for voter and candidate registration. Once the ballots are cast and tallied, the build up to 2021’s local government elections will fade into memory as the political battleground turns elsewhere. The long-run implications, however, may reverberate for some time.
After 27 years, South Africa’s democracy can barely be considered to have entered its adolescence. Unsurprisingly, the pains accompanying the process of growth and maturation have become more pronounced in recent times. The State vs. Former President Zuma has manifested as another epiphenomenon of this course, with the authority of the executive, the ruling party, and the judiciary pitted against one another, resulting in the setting of new legal precedents and civil contestation. Set against a backdrop of the hollowing out of state-owned enterprises and other Chapter 9 institutions, state capture and the investigation into its participants through the Zondo Commission has brought to light the need for careful reform and oversight into the powers of officials, political parties, and non-state actors to influence institutions of democracy for self-enrichment. Challenging the authority of the IEC may have served as a declaration by some within the polity and civil society of a new front on which this battle will be fought. In the short term, it may add to the perception that South Africa’s democracy has become farcical, fraught with political interference, and symptomatic of a terminal disease within the state. Over time, however, the painful process of bringing the inner workings of the IEC to the fore and re-affirming its mandate could help serve as the antidote.
by Heinrich Krogman | Jun 8, 2021 | Blog
As governments all over the world go through the final stages of ebb and flow on opening and closing their economies, South Africa seems to be keeping pace with the global recovery. Merchandise exports continue to outpace imports while the rand continues to strengthen against all major currencies. These developments have a lot to do with the rebound in foreign demand for commodities, but most other domestic recovery indicators are also encouraging. There is, however, still missing elements that hinder the process of getting back to a pre-pandemic economy and many more to overcome it.
As things go back to ‘normal’ sectors that have been most restricted during the pandemic continue to suffer from the low rate of vaccination. South Africa’s trade in services (notably tourism) will be the last horse out of the stables and will likely miss the initial release of pent-up demand for foreign holiday seekers coming out of their hermit stupor.
Unfortunately, as if given license by its own shuttering, South Africa’s economic strategy during the pandemic has also turned inward. True, much attention has been afforded to the African continental free trade agreement (AfCFTA) –as a massive step towards further economic integration on the African continent- however, the domestic policy response seems to view it primarily as a way to expand specific sectoral interest.
Referring to the sectoral master plans that all follow a similar strategy; target sectors for intervention and impose stricter regulations on the supporting value chain(s), attempt to increase competitiveness through various support measures with a focus on local industrialisation, and aim to sustain growth through exports to new markets. While this seems like a great way to boost domestic output, the strategy might simultaneously overestimate the value of localisation while underestimating the benefits of foreign competition, partnerships, and support services that fall outside of the blessed sectors.
All the while, pre-pandemic systemic issues remain ever-present; notably load shedding, jobless growth, fiscal risks, and still no high demand radio-frequency spectrum auction. To be fair, given the policies put in place to safeguard South Africa’s citizens and the healthcare system from being overrun, it’s not surprising that little progress has been made on these fronts.
So, what has a year of ‘isolation’ done for South Africa’s trade policy discourse? The fragility of the global value chain was certainly highlighted and pressed as a motivator for further domestication of outputs. It is not untrue that the global value chain is fragile to all sorts of shocks, but to assume that it’s a permanent threat is ridiculous especially when the current boom in South Africa’s exports and a stellar recovery in the value of the rand is down to the recovery of the global value chain.
Wanting to have more things made in South Africa is not inherently terrible and having an export-oriented economic strategy is not bad either. Wanting control over most of it might be the tricky part especially when negotiating with much more vulnerable states on deeper economic integration and continental prosperity.
by Danae Govender | Jun 1, 2021 | Blog
The African Continental Free Trade Area (AfCFTA) was formed with the intention of boosting intra-African trade to accelerate growth and facilitate investment on the continent. This was done with the pan-African vision of an integrated, peaceful, and prosperous continent. While the more established names within the trade space may very well be capable of capitalising on the potential gain from the agreement, the benefits of the AfCFTA are not confined to those at the very top of the industrial ladder. Small and medium enterprises (SMEs) and women-led, informal businesses have also been tipped as potential beneficiaries of the free trade area.
SMEs account for approximately 80{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of Africa’s employment and 50{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of its GDP. In South Africa, they provide employment to 47{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of the workforce and account for around 20{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of GDP. In terms of informal cross-border traders, women account for around 70{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}. Despite the large contribution to their relevant subcategories, these entities remain among the most vulnerable to economic shocks and their ability to engage in cross-border trade remains limited. Exacerbating these issues further, without a doubt, is the ongoing COVID-19 pandemic. Following the launch of the AfCFTA on 1 January 2021, this could likely change.
By reducing trade barriers and simplifying the trade process, the AfCFTA will enable African businesses to progressively gain access to the continental market. While it is not expected that SMEs will commence with immediate transcontinental trade, for those entities that are not quite adept at cross-border trade, the AfCFTA provides an opportunity to tap into regional markets before proceeding further. Likewise, for informal, women-led businesses, that currently face harassment, violence, and confiscation of goods and imprisonment, the AfCFTA will provide an opportunity to operate through more formal and well-protected channels. These will, in turn, allow for a scaling up of (international) business operations, an increase in innovation, and, where possible, embracing digitisation.
As expected, however, due to the small- and, often, the informal scale of operations, SMEs and related entities may not be fully capable of leveraging the benefits presented by the free trade area. This has not gone unrecognised by the AfCFTA or the relevant stakeholders. There have been calls from relevant national ministries for programs aimed at addressing the issues facing SMEs, such as market access, education, and information, financing and credit facilities,
The African Continental Free Trade Area (AfCFTA) was formed with the intention of boosting intra-African trade to accelerate growth and facilitate investment on the continent. This was done with the pan-African vision of an integrated, peaceful, and prosperous continent. While the more established names within the trade space may very well be capable of capitalising on potential gains from the agreement, benefits of the AfCFTA are not confined to those at the very top of the industrial ladder. Small and medium enterprises (SMEs) and women-led, informal businesses have also been tipped as potential beneficiaries of the free trade area.
SMEs account for approximately 80{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of Africa’s employment and 50{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of its GDP.[1] In South Africa, they provide employment to 47{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of the workforce and account for around 20{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of GDP. [2] In terms of informal cross-border traders, women account for around 70{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}.[3] Despite the large contribution to their relevant subcategories, these entities remain among the most vulnerable to economic shocks and their ability to engage in cross-border trade remains limited. Exacerbating these issues further, without a doubt, is the ongoing COVID-19 pandemic. Following the launch of the AfCFTA on 1 January 2021, this could likely change.
By reducing trade barriers and simplifying the trade process, the AfCFTA will enable African businesses to progressively gain access to the continental market. While it is not expected that SMEs will commence with immediate transcontinental trade, for those entities that are not quite adept at cross-border trade, the AfCFTA provides an opportunity to tap into regional markets before proceeding further. Likewise, for informal, women-led businesses, that currently face harassment, violence, and confiscation of goods and imprisonment, the AfCFTA will provide an opportunity to operate through more formal and well-protected channels.[4] These will, in turn, allow for a scaling up of (international) business operations, an increase in innovation, and, where possible, embracing digitisation.
As expected, however, due to the small and, often, informal scale of operations, SMEs and related entities may not be fully capable of leveraging the benefits presented by the free trade area. This has not gone unrecognised by the AfCFTA or the relevant stakeholders. There have been calls from relevant national ministries for programmes aimed at addressing the issues facing SMEs, such as market access, education and information, financing and credit facilities, access to innovative technologies, access to energy, infrastructure, and marketing networks.[5]
Considering the issues facing less well-established businesses, tangible attempts have been made at assisting smaller businesses improve their capacity. Among these is the recently launched eTradehub- a sort of “one-stop-shop” for small business to gain trade information and the related trade management tools. This online portal was launched by the Women Traders in the AfCFTA partnership with the intention of increasing the participation of women-led SMEs in the AfCFTA.[6],[7]
Almost equally as recent, MTN SA entered a USD 2 million partnership with the International Finance Corporation to broaden mobile financial services inclusion in South Africa. Although this partnership is not explicitly related to the AfCFTA, it is imperative that the intended beneficiaries capitalise on the potential gains to improve on their capacity to trade across borders.[8]
It is on this note that this piece concludes. Ultimately, all the efforts in the world would be in vain if there is no willingness, from the intended beneficiaries, to participate. As such, SMEs, and those representing them, are called to action to drive the inclusion agenda further.[9]
[1] Rilwan Akeyewale, ‘Who are the winners and losers in Africa’s Continental Free Trade area?’, World Economic Forum, https://www.weforum.org/agenda/2018/10/africa-continental-free-trade-afcfta-sme-business/.
[2] Simone Liedtke, ‘SME sector ‘critical’ to growing South Africa’s economy – Pityana’, Engineering News, April 11, 2019, https://www.engineeringnews.co.za/article/sme-sector-critical-to-growing-south-africas-economy-pityana-2019-04-11#.
[3] Nghinomenwa Erastus, ‘AfCFTA potential benefits to SMEs, women’, The Namibian, May 12, 2021, https://www.namibian.com.na/101588/read/Afcfta-potential-benefits-to-SMEs-women.
[4] Op. cit.
[5] APO Group, ‘South African women’s minister seeks voice for women in AfCFTA’, Africa News, https://www.africanews.com/2021/02/24/south-africa-s-women-s-minister-seeks-voice-for-women-in-afcfta/
[6] Women Traders in the AfCFTA is a partnership formed by the International Chamber of Commerce (ICC), Trade Law Centre (TRALAC), United Parcel Service (UPS), and West Blue Consulting.
[7] International Chamber of Commerce, ‘Launch of eTradeHubs to simplify trade processes for woman small business owners in AfCFTA’, https://iccwbo.org/media-wall/news-speeches/launch-of-etradehubs-to-simplify-trade-processes-for-woman-small-business-owners-in-afcfta/.
[8] Given Majola, ‘MTN’s MoMo gets its mojo in SA with IFC partnership’, IOL, May 20, 2021, https://www.iol.co.za/business-report/companies/mtns-momo-gets-its-mojo-in-sa-with-ifc-partnership-22b1472c-6057-4fcd-aaaf-8bf9fafb9b7f.
[9] ‘SAZ challenges women to grab AfCFTA opporutnities’, Chronicle, September 2, 2020, https://www.chronicle.co.zw/saz-challenges-women-to-grab-afcfta-opportunities/.
by Anna Ngarachu | Mar 29, 2021 | Blog
Anna Ngarachu
I attended the annual Africa Energy Indaba, two weeks back, which brought together key experts from
private and public sectors and other interested participants to talk about the next steps for Africa’s
energy transition, as well as networking and exhibitor, displays all packaged very well on a virtual
platform.
Luckily, there was no stage 2,3 or 4 load-shedding that week (on my side) but what an irony it is that
we still have to focus on powering Africa to participate in virtual platforms that enable us to, in fact,
‘Power Africa’. Overcoming the energy deficiency issues was mentioned at the SONA, with some
specific mentions on the way forward for government:
“Over the last year, we have taken action to urgently and substantially increase generation capacity
in addition to what Eskom generates… The Department of Mineral Resources and Energy will soon
be announcing the successful bids for 2 000 megawatts (MW) of emergency power… Government
will soon be initiating the procurement of an additional 11 800 MW of power from renewable
energy, natural gas, battery storage and coal in line with the Integrated Resource Plan 2019.”
The bidding for emergency power is likely to call for liquefied natural gas (LNG) imports and the
mention of natural gas highlights its strategic importance in South Africa’s energy mix. This could not
be timed more aptly, in light of South Africa headlining its gas finds by Total in February 2019 at
Brulpadda and 2020 in Luiperd (both located off the shore of Mossel Bay on Block 11B/12B in the
Outeniqua Basin). Total predicts that the potential for the discovery of the net gas could hold 1.5 to
3 billion barrels.
Tutwa’s interest has be
en in understandings South Africa’s gas industry, and the Gas Forum at the
Energy Indaba provided some insightful takeaways.
Most African countries, for a variety of reasons, lack power – be this the long, ongoing droughts that
affect hydroelectric power, or the bad policy planning and historic coal-driven industries. There is
now a thorough understanding that a thriving economy cannot be built without a stable energy
supply – for households, industry, and transport. Moreover, this energy stability will need to
transition to cleaner, greener sources in line with international protocols to which South Africa has
signed up, such as the Paris Agreement.
An immediate shift away from fossil fuels may not be realistic for Africa; where the major source of
fuel for many Africans is still wood. Africa will need to find localised means to deliver its
development needs, including its re-industrialisation and in how it will utilise energy technologies
and delivery solutions in a phased transition.
Renewables are well suited for this point of transition, and natural gas – while decidedly a fossil fuel
provides an interim solution to a full green transition. Natural gas is a cleaner-burning fuel than the
current higher polluting alternatives. Gradually eliminating more polluting fuels, while allowing more
people to gain access to energy, is both an environmental and ethical decision. Therefore, natural
gas will play a bridging role to renewables, for however long that bridge may be.
For South Africa, the current focus by government looks at a three-step approach: importing LNG
from the globe, then from the region, and thereafter tapping into its own gas reserves.
To tap into its gas reserves requires monetisation which is challenging. The reality is that without
capital investment, particularly private capital, these Total finds could remain ‘dead in the water’.
Also, the gas extraction may be viable but may come in too late, as it will take 10 years or so to
develop and thereafter, to see returns. With global developments shifting towards greener sources
of fuels, the gas prospects may remain unrealised.
Infrastructure constraints present another hurdle for the country as it does not have a massive gas
infrastructure network of pipelines to transport gas to various supply nodes. I learnt, at the Indaba,
that pipelines also don’t need to be mutually exclusive to other solutions – using ships, rail and road,
known as “virtual pipelines” could be an option for the country to transport imported LNG to various
supply nodes in the country. So ultimately, there is a chicken and egg scenario to beat; where you
need the market to develop the gas fields but then you also need the gas fields to develop the
market. Small-scale options like virtual pipelines may assist to build a market for gas in a step-wise
fashion.
The infrastructure invested to transport natural gas should also be fit for purpose for renewables
later on, including for a hydrogen gas economy, dubbed the next greener gas alternative in the not-
so-distant future.
Natural gas will make a significant dent in the industrial sector, especially towards reducing their
power costs and by ensuring efficiently run operations. Using compressed natural gas to fuel
vehicles offers another array of benefits; especially long-haul trucks. The running of large hospitals
will see benefits through combined heat and power (CHP) systems that generate power onsite.
Natural gas development will also boost the development of the chemicals industry. The gas
network is, unfortunately, not set-up to supply natural gas to households en-masse (especially those
in rural areas), so this may be a long-term option, if at all.
There is a timing issue, however, with the trajectory of global developments. Gas has an immediate
opportunity within the next 5-20 years; and beyond that, it gets hazy, due to global greener
developments and policies. Policy windows for investors are also closing for developing countries,
and developing countries may be caught in between and become subject to developed countries’
policies around renewal energy sources. However, natural gas has an immediate opportunity today,
including in South Africa.
