People & Money

Continued Public-Private Cooperation Vital for South Africa Energy Growth

As South Africa continues targeting sectoral growth through the expansion of power generation capacity, the utilization of public-private partnerships will be a key determinant of success.”

South Africa’s government has been vocal about its efforts to grow domestic power generation and attain a more stable energy supply across the country. Through the implementation of its Integrated Resource Plan 2010-2030 – which seeks to employ a diversified energy mix to drive new project developments – South Africa aims to revitalize both its energy industry and national economy. However, such objectives cannot be achieved by government action alone. Speaking at the 27th Investing in African Mining Indaba conference this week, a panel of industry leaders discussed the necessity of public-private cooperation not only within the mining sector but also in the energy industry at large.

Public-private partnerships (PPPs) provide a range of benefits, including accelerated sector growth, enhanced infrastructure solutions, more relevant technical expertise, and greater fiscal depth. PPP-backed developments benefit from faster project completions and reduced delays, as government can help facilitate a timely provision of public services. Meanwhile, private partners offer access to private capital and mutual collaboration ensures that investment is directed toward projects with both tangible returns and socioeconomic benefit to the host country.

“Collaborative efforts have demonstrated that if the government and private sector work together, with one clear objective, we can achieve all of our strategic imperatives,” said panelist Advocate Thabo Mokoena, Director General for the Department of Mineral Resources and Energy in South Africa.

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“Collaboration starts with a minister whose heart is in the right place,” added panelist Neal Froneman, CEO, Sibanye-Stillwater. “The South African Minister has shown excellent engagement and substantial collaboration already. The government cannot on its own grow the economy. It is the collaborative effort in creating the right environment that is key. [The private sector] is not the enemy – it is part of the solution.”

Through its Renewable Energy Independent Power Producer Procurement (REIPPP) program, South Africa has demonstrated the success that public-private partnerships can yield, encouraging independent producers to submit bids on the development and design of large-scale renewable energy plants to rapidly increase the renewable share of the domestic energy mix. To date, 102 independent power projects have been procured from four bidding rounds, with a fifth-round expected early this year. Cumulatively, the fourth bidding round in the REIPPP program represented a generation capacity of approximately 2,300 MW and a total investment value of five billion dollars. With more projects expected to come online over the next few years, the continued success of the REIPPP in providing a sufficient and secure electricity supply to the country rests on its ability to unite public and private interests.

“It has reached a point of urgency,” said panelist Mzila Mtheniane, Executive Head, Stakeholder Affairs. “Collaboration and cooperation alone will not be sufficient. Rather, we need to see affirmative action as a result of these collaborative efforts. We need collaboration within the departments and within the mining industry as a whole.”

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So, what needs to be done to facilitate public-private success? Firstly, political will is at the forefront of bilateral cooperation. According to the World Bank, the provision of infrastructure and services by the private sector is a radical change in the status quo, and the concept of private sector management and operatorship of “public services” can function as a major deterrent to such partnerships. As a result, effective collaboration requires significant political leadership, as demonstrated by South Africa’s Minister of Mineral Resources and Energy Gwede Mantashe. Additionally, governments must create an enabling environment, in which transparency and standardized, easy-to-navigate processes are ensured.

“At a high level, we need to be working towards policy certainty,” said Froneman. “We require good policies that are helpful and establishes an investor-friendly environment. We have to get to a point where we respect the rights of investors and stakeholders. Currently, the country does not have a common vision for the industry. It is essential that we assign a vision and work towards that in a collaborative way.”

South Africa’s success to date in facilitating new project developments and spurring industry growth can be accredited to its utilization of public-private sector collaboration through initiatives such as the REIPPP program. Accordingly, the country can serve as a template for other African markets looking to expand their energy sectors and facilitate socioeconomic growth via the injection of private capital and expertise.

By Charné Hundermark, sub-editor at Africa Oil and Power, Africa’s dedicated energy investment platform.

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