Energy sector funding dependent on favourable economic environment - CNBC Africa

Energy sector funding dependent on favourable economic environment

Southern Africa

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Infrastructure development funding is key for rural Africa to gain access to electricity.

“In South Africa we’re seeing a lot of investment in the renewable side but we need more than that. We need private industry to also be involved in the development of base load power projects, coal and gas types of projects and in the rest of Africa even more so,” Cornelis van der Waal, an analyst at Frost & Sullivan, told CNBC Africa.

“We’ve got over 50 active IPPs on the continent so there’s quite a bit of movement at the moment in terms of investment, but a lot more needs to be done in terms of creating the right environment for the private industry to participate in the energy industry."

A backlog in energy infrastructure development has had a negative impact on South Africa and Africa in general, with only five per cent of rural areas on the continent having access to electricity.

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“If we look at South Africa for instance, we’ve got an electricity-connected rate of over 80 per cent and obviously, as South Africa we are the largest economy in Africa, and we would expect that. Certainly if we go further North, the rates drop significantly,” van der Waal explained. 

“One of the biggest challenges is that the land mass of Southern Africa is significant, and the population is quite spread out, so it’s fairly expensive to get electricity to all the rural areas. However, I think most of the significant investment currently taking place is in urban areas or around mining complexes and those will create economic activity that will, in turn, stimulate the opportunities for rural communities as well.”

Van der Waal also indicated that there’s a big debate on the amount of renewables that South Africa requires.

“We need to point out that coal is a very dirty source of electricity generation and if we were to implement a carbon tax, it will have an impact on our competitiveness and our ability to compete on the global market. We have to look at alternatives,” he said.

“Whether pure green energy, in the form of solar and wind, necessarily brings a 100 per cent solution to the mix is very much debatable, but there needs to be a proper look at what the energy mix needs to be – natural gas has a very big role to play in that. Companies who are able to develop associated infrastructure over the next five to 10 years will be the companies who benefit most from the energy revolution in Southern Africa.” 

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