For South African households and businesses, the country’s electricity problems no longer begin and end with generation. Power is sometimes produced cheaply in one part of the country but cannot be moved to the places where people need it, and that constraint is now limiting how much new generation can actually be added. It is against this backdrop that Business Leadership South Africa chief executive Busisiwe Mavuso is pressing government to publish a firm timetable for private investment in the grid, with milestones running all the way through to financial close.
Mavuso’s central concern is what the uncertainty means for the people waiting at the end of the wire. Grid capacity is already holding back new electricity generation, she said, because power cannot always be moved from areas where it is cheaper to produce to where it is needed. Reliable electricity and competitive prices, she argued, help companies invest and expand, and that expansion creates jobs. Sticking to reform timetables, in her words, will help the country reach that destination sooner.
Her immediate criticism concerns a slipped deadline. The Department of Electricity and Energy and National Treasury recently moved the request for proposals for the independent transmission projects programme from the third quarter of this year to the second quarter of next year. The programme is meant to attract substantial private investment to expand the grid and connect more generation to consumers. Mavuso called the delay an unfortunate slippage, but she was careful not to condemn it outright. Rushing to market, she wrote, risks a procurement that fails or comes in overpriced, and a failed process could itself produce further delays and higher costs if bidders are unable to assess the risks properly. The breathing space, on her reading, gives government time to strengthen the institutions needed to manage the procurement.
What she says is missing is clarity about everything that happens after the request for proposals goes out. The process must still cover bid evaluation, negotiations with successful bidders and financial close, the point at which construction can begin. On the current trajectory, she warned, the new grid infrastructure is unlikely to be in operation by the end of the decade. A clear timetable for the whole process now, she wrote, would help manage expectations and enable planning.
Behind the procurement sits a bigger institutional question, and it is one that matters directly to the investors whose money the programme needs. The National Transmission Company South Africa is being separated from Eskom, along with its transmission assets, and is expected to become the Independent Transmission System and Market Operator. That new entity will be the counterparty for investors developing grid infrastructure. Because it is still being established and lacks its own balance sheet and credit history, Mavuso welcomed the creation of a credit guarantee vehicle by National Treasury, the World Bank, FSD Africa and the Development Bank of Southern Africa. The vehicle is intended to protect investors from credit risks associated with the company, and it was incorporated in August and is being prepared to support the programme. The guarantee, she suggested, could give investors the confidence to make long term, multi billion rand commitments.
Even so, she argued, the guarantee alone is not enough. Business Leadership South Africa and Eskom are aligned on completing the transfer of Eskom’s transmission assets to the independent operator, and finalising that process would clarify which institution investors are actually dealing with. “The guarantee vehicle will help, but having a robust institutional buyer underpinning it will provide additional confidence,” she wrote.
The scale of what is being asked of private capital is considerable. The first phase of grid investment covers 1,164 kilometres of new lines, set against the National Transmission Company’s plan to build 14,500 kilometres by 2034. Mavuso said further procurements would need to follow swiftly if that gap is to be closed.
Meanwhile, she also wants a timetable for wider reforms, including the South African Wholesale Electricity Market, which she described as important for enabling competition in the electricity sector. Banks and fund managers, she noted, will be important investors in grid infrastructure, while businesses can support the restructuring process. For the households and firms whose livelihoods depend on dependable power, the message was simple: publish the plan, and keep to it. Whether government can now hold to a schedule it has already let slip once remains the open question.