Despite the governance struggles of South Africa’s state-owned companies over the past decade, they will still play a critical role in the local economy as their assets account for a significant percentage of the country’s GDP.
South Africa’s state-owned companies such as Eskom have a vital mandate in driving socioeconomic development and unlocking growth potential not only in the country, but the wider region.
The demand for energy transition in Africa is significant. The African Development Bank estimated that Africa will need about $1.2-trillion worth of investments to enable energy security and the just transition away from fossil fuels to more sustainable energy solutions. This approach tackles climate change while ensuring continued access and economic growth across Africa.
At present, this is not an investment cost that is readily available on the continent. This creates an opportunity for broader partnerships with other investors and pools of capital from outside Africa.
There is an urgent need for a deliberate partnership approach across financial institutions to enable Africa to achieve energy security and a just transition.
Recent data and analysis from the International Energy Agency estimates that more than 700-million of Sub-Saharan Africa’s population still has no access to electricity. Africans need energy that is reliable, affordable, safe and sustainable while balancing transitional measures that will enable access.
A just transition remains a key requirement of the energy transition that Africa ought to undertake. This transition must be done in a responsible manner, investing in Africa’s future.
More than a year ago Standard Bank took a bold decision to support Eskom to the tune of $500m to roll out its transmission network. However, this did not constitute the bank’s exposure to fossil fuels, but to help Eskom expand its transmission network to connect to renewable projects, largely in the Northern Cape.
Most of Standard Bank’s renewable energy projects are now under construction, largely those awarded during Bid Window 5 of the Renewable Energy Independent Power Producers Procurement Programme, and the Emergency Energy Round of initiatives in South Africa.
Others relate to self-generation by mining companies and other large corporates.
To date South Africa has experienced just over 100 days without load-shedding. With this, the business environment has improved notably compared to 2023.
Previously, rolling blackouts lasted the equivalent of 289 days in 2023, up from 157 in 2022, disrupting economic activity and increasing costs for businesses.
Significant changes are on the horizon for the rest of 2024, bringing to life vital partnerships that were forged between business, industry and government to drive forward the stalled reform agenda.
According to the latest South African Reserve Bank Monitory Policy Committee Report, the Bank has reduced its assumption on the number of load-shedding days in 2024 from 200 to 180 days.
While Eskom has a lot of work ahead, there is increasing confidence that the historic downward trend of Eskom’s plant has stabilised, and this is backed by sustained positive performance at priority power stations
The projected cost to GDP from load-shedding in 2024 has also been revised down to 0.5 percentage points versus 2 percentage points in 2023 and fading to 0.2 percentage points for 2025 and 0.04 for 2026.
This demonstrates how key reforms by the government can accelerate the energy turnaround and in turn boost business confidence.
Writing in his weekly newsletter, President Cyril Ramaphosa said that 100 days without load-shedding “is not a reason to relax”.
Ramaphosa said this milestone encourages us to do more and work faster to ensure a secure supply of electricity now and into the future.
While Eskom has a lot of work ahead, there is increasing confidence that the historic downward trend of Eskom’s plant has stabilised, and this is backed by sustained positive performance at priority power stations.
Over the past few months, a clear message of performance and accountability from Eskom is emerging, boosting much-needed investor confidence that is crucial to unlock economic growth and job creation.
Africa’s energy transition opportunity is immense. However, local financial institutions lack sufficient capital muscle to seize it meaningfully.
Over the past decade, the Gulf Co-operation Council has emerged as a major investor across Africa, with a growing number of trade deals significantly benefiting both regions.
Standard Bank remains committed to tapping into different sources of funding in order to make a meaningful impact by forging better relationships with development finance institutions that want to invest in these opportunities. Together as the private sector and development finance instiutiuons we can combine our origination, credit and risk management capabilities for the benefit of the continent.
Africa is an ideal destination for green investments in renewable energy technologies, and the potential for micro- and off-grid renewable systems is immense. The solution to Africa’s energy challenges, however, goes beyond government intervention — as demonstrated in the Eskom case.
We have an opportunity to help shepherd not only South Africa, but Africa’s just transition, increasing the continent’s resilience, creating jobs and reducing poverty anchored on a sustainable approach to energy security for the continent.
• Kenny Fihla, Standard Bank Group Chief Executive: Corporate and Investment Banking
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