Why this investment manager thinks renewables are good for SA

In a bid to bridge the gap for the 650 million Africans who have never seen a light bulb, there has been a growing conversation around the importance of alternative energy sources, specifically renewable energy. The cost of capital for renewable energy projects within South Africa's Renewable Energy Power Producers Procurement Programme is expected to decrease, leading to lower tariffs for end consumers. Mark Van Wyk, the Head of Unlisted Investments at Mergence Investment Managers, shared insights on the benefits of investing in renewable energy projects and the impact on both investors and consumers. Van Wyk discussed how independent power producers are assisting in funding infrastructure growth while maintaining a conservative balance sheet in the face of fiscal deficits across the continent. Mergence Investment Managers has already invested in 12 projects in solar and wind energy, with over 1.4 billion rand invested. These projects are operational and supplying energy to the grid. Van Wyk highlighted the success of these projects in attracting new investors by demonstrating performance in converting electrons into revenue and dividends. The stability and profitability of these projects post-commissioning have alleviated concerns around potential cost overruns or delays, making renewable energy investments more attractive. When asked about the lifespan of renewable energy projects and potential concerns for investors, Van Wyk emphasized the long-term investment horizon enabled by the 20-year power purchase agreements in South Africa. While technological advancements may impact the lifespan of assets, meticulous maintenance regimes and reserve accounts are in place to ensure the sustainability and continuous generation of electricity. The benefits of investing in renewable energy extend beyond financial returns for investors. Lower tariffs for end consumers, powered by renewable energy sources, offer a sustainable and cost-effective solution for energy needs. Van Wyk's insights shed light on the opportunities and advantages of renewable energy investments, signaling a positive trajectory for South Africa's energy landscape.