For companies looking to venture into Africa, many think immediately of going into South Africa. And while no one will deny that it is a safe bet compared to most other African countries, there are some factors that should be considered before jumping the investment gun.
While suffering from apartheid until 1994, the act of racial discrimination was legal in South Africa. The early 1960s brought on protests from the African National Congress (ANC) and Pan-African Congress (PAC), which forced the two groups to go underground. The groups rallied and fought apartheid through guerilla warfare and sabotage. This, in addition to racial discrimination, prohibited the growth of the private sector. ANC leader, Nelson Mandela, won the 1994 elections carrying out a five-year term as President of South Africa. During his reign, his government issued an interim constitution establishing a Government of National Unity (GNU) which required the Constitutional Assembly (CA) to draft and approve a permanent constitution by May 9, 1996. Mandela signed a new constitution into law on December 10 which came into forces on February 3, 1997.
The ANC-led government focused on social issues that were previously neglected during the apartheid era. Mandela’s administration began to re-invent itself and reintroduced South Africa into the global economy by implementing a market-driven economic plan known as Growth, Employment, and Redistribution (GEAR). The country’s strategy shifted when Thabo Mbeki won the 1999 elections, focusing on the economy.
And by focusing on its economic growth, South Africa has seen a surge of investors coming into the region as a result. In addition, its renewable energy sector has been gaining momentum.
The National Energy Regulator of South Africa (Nersa) introduced a renewable energy feed-in tariff (Refit) on March 31, 2009. The Refit decision was delayed from March 9 to March 31 because of growing feedback from interested groups. However, discussions continued over the Refit with participants at the Refit hearing in October 2009 that had two issues on the table concerning the private sector and the tension between the regulator and its stance on regulations. However, those gathered at the meeting discussing the proposed consultation paper, also noted that the Nersa’s willingness to work toward a beneficial solution to help South Africa’s renewable energy goals reach fruition.
The Refit regulation and other legislative procedures have paved an easier road for investors to get their hands in South Africa’s pot. In 2010 it was announced that independent power producers (IPPs) would be chosen by Q3 in South Africa and the Public Enterprises Deputy Minister reiterated the selection process and its necessity (SA to Select RE IPPs by Q3). At the Interministerial Committee on Energy meeting, Enoch Godongwana said the government must end the IPP struggle in order to combat the looming energy crisis (More News for IPPs in South Africa).
At the end of May, it was announced that South Africa’s state-owned utility Eskom has picked two IPPs for its medium-term power purchase program (MTPPP) and said it will add four more IPPs to that list, according to Eskom’s system operations and planning head Kannan Lakmeeharan. Following that announcement, Nersa said that it was considering four separate power purchase agreements (PPAs) between state-owned power utility Eskom and IPPs for 413.5 MW. Systems operations and planning head Kannan Lakmeeharanalso indicated that a total of six MTPPP programs, with five separate IPPs, are at various stages of development and that the first PPAs could yield between 200 MW and 300 MW by July this year. "Hopefully, the full 400 MW will be operational by March next year," Lakmeeharan said.Nersa’s regulator Thembani Bukula told Alternative Energy Africa, “These are not part of the Refit yet, but part of the MTPPP that was established in 2008-2009.” However, this indicates that similar projects will soon be added to the Refit.
South Africa’s government has improved its economy and made great strides creating an example for the rest of the continent. However, there are problems that remain.
Alternative Energy Africa will continue its special investor profile highlighting South Africa’s major RE projects, scandals, and alleged corruption.
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