The private sector plays a vital role in shaping South Africas energy future

Ockert Doyer and Pawan Singh, portfolio managers of Sanlam Investments Sustainable Infrastructure Fund

South Africa’s private sector is stepping up to find sustainable solutions to the country’s ongoing electricity shortage, which will fuel community development and stimulate economic growth.

In South Africa, smaller, private sector energy installations and solutions are increasingly compensating for the lack of momentum in large-scale government-led renewable energy initiatives. This is reducing dependence on the Eskom electricity grid and strengthening the country’s energy resilience and security. More broadly, this trend is strengthening the South African economy.

South Africa has faced energy challenges for many years, particularly the recurrence of electricity load shedding as Eskom and the government appear to be unable to find a permanent solution to deliver sustainable, low-cost electricity. This has sparked a quiet revolution in the private sector. Smaller, self-sufficient energy installations are engineered to operate autonomously, free from the constraints of Eskom. This is diversifying the country’s energy sources into solutions that mostly align with global sustainability goals. It’s a practical step toward a more eco-friendly and dependable energy supply.

The private sector’s involvement in this transformation is pivotal and demonstrates remarkable innovation and adaptability. Examples from around the world, such as Vietnam’s successful photovoltaic (PV) panel incentives and the flourishing energy-trading practices in the US, illustrate the resourcefulness of the private sector. Although numbers are hard to come by, estimates by Eskom and Professor Anton Eberhard revealed that South African households and businesses had installed around 4.4 gigawatts of rooftop solar PV by June 2023, resulting in an increase in the country’s installed solar rooftop PV from just under one gigawatt in March 2023. This 340% increase in solar rooftop PV has significantly reduced the demand that Eskom needs to meet during the day.

Developing markets like South Africa, offer unique opportunities for decentralised energy initiatives. The largely untapped township economy holds immense potential for sustainable energy solutions. Embracing these opportunities not only addresses energy needs but also fuels community development and stimulates economic growth.

A particularly promising source of energy is biomass. Although it is currently underutilised in South Africa, the UK’s large-scale biomass plants demonstrate its viability in ensuring consistent baseload power. Favourable local conditions make biomass an attractive proposition, promising both sustainability and energy security.

However, there are challenges in this transition. Regulatory uncertainties, the complexities of financial and operational risk management, and the harmonisation of diverse energy sources all demand meticulous planning and collaboration. Institutions like commercial banks, development finance institutions (like the Development Bank of Southern Africa (DBSA)), sponsors of projects and private equity providers all play crucial roles. They provide the engineering and risk capital to develop and fund these solutions.

South Africa’s energy transformation is not just about innovation, but about finding practical solutions. While there are no quick fixes, the private sector’s ingenuity and engagement in reshaping the nation’s energy landscape reflects its determination to overcome challenges and craft a brighter, more sustainable future for the country.

Disclaimer:

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