27 July 2023
South Africa’s perfect storm may provide the stretch we need to secure sustainable growth.
As the cold weather descends, it’s tempting to get sucked into a downward spiral of negativity over all the challenges South Africa faces. Stubbornly high inflation is putting further pressure on the cost of living, a weak rand is pushing up the cost of imported goods and petrol and then there are the ongoing power supply issues.
These are undoubtedly serious problems. Might this be a perfect storm, providing opportunity for South Africa to overcome adversity and thrive? South Africans have proved time and again that when all hope seems lost, they have the resilience and perseverance to overcome the obstacles and embrace the opportunities that emerge even in the darkest times.
We’ve already seen green shoots emerging from the unprecedented challenges we’ve faced over the last few years. We only need to look as far back as 2020, where, almost overnight, the COVID pandemic forced companies to transition to remote working conditions, finally tapping into the productivity gains technology has offered us for the last 15 years. Post-pandemic, corporates have been tapping into the cost efficiencies and productivity gains a motivated remote or hybrid workforce offers.
Businesses finding ways to survive the current power supply issues will likely benefit from the same step change in how they operate. Already manufacturing companies reliant on a predictable power supply have been forced to innovate and find ways to do more with less (power) by using new materials and production techniques. Many have introduced night shifts to tap into the more reliable energy supply available when load-shedding schedules are reduced overnight, and demand on the grid eases.
On solving the power crisis in South Africa, we were buoyed by the constructive solutions envisaged by many of The Gathering: Earth Edition participants. Former Eskom CEO Andre De Ruyter believes solving South Africa’s energy and environmental crisis is “not a moonshot but within our grasp”. He backed up his conviction with a useful roadmap of how we can get there equitably, but emphasised that it will require resolve, urgency, and leadership ready to grasp the opportunity the crisis presents.
Actions taken now mean that when South Africa’s power supply issues are alleviated, businesses that have managed to overcome the challenges could leapfrog their international peers, having developed the capability to produce on a 24/7 basis and conquer other difficulties that have stood in their way.
Positively, the pipeline of new private sector energy generation projects has multiplied over the past year to reach a combined capacity of 10 000 megawatts – and 3 000 MW are set to come online next year. Additionally, Eskom is expected to bring several major power-generating units back online by the end of the year.
Absa is actively participating in solving South Africa’s energy crisis, becoming Africa’s leader in renewable energy finance. We’re on track to mobilise R100 billion of sustainable finance by the end of 2025 and are channelling this through the Renewable Energy Independent Power Producer Procurement Programme (REIPPP). To date, we have arranged financing for 33 projects (approximately 3GWs) under the first four bidding rounds of the programme, which are now in the operational phase and already supply power to the grid.
The REIPPP is the critical driver of South Africa’s transition to a low-carbon economy. It aligns with the country’s commitment to reducing carbon emissions in line with the 2015 Paris Climate Agreement and the 2019 Energy Integrated Resource Plan goal to diversify energy resources and reduce reliance on coal. Renewable energy technologies supported by the plan include wind, solar PV, concentrated solar power and biomass.
Apart from the government’s REIPP programme, we are also actively assisting clients in entering the captive energy market. We have been involved in the first utility-scale deal, which reached financial close during 2022 and is 200MW in size. We expect this market to grow significantly over the next two to three years, and we are currently mandated to facilitate over 1GW.
Absa also offers loan funding to our small- and medium-sized clients to install alternative energy solutions. In addition to providing finance, Absa also extends grants to qualifying businesses through its R50 million renewable energy fund. These total 10% of the overall installation value, up to a maximum of R50 000.
As one of South Africa’s largest banks, we are fully invested in doing what is right from an environmental perspective and solving South Africa’s energy challenges. Crucial to achieving an equitable and just transition is that we engage with those affected by the transition and co-create a new future with all stakeholders. Doing so will allow us to address the country’s untenable unemployment levels through job creation and skills development.
As Thomas Edison said: “Most people miss opportunity because it is dressed in overalls and looks like work.” The perfect storm has jolted us into understanding that we have no other option but to work hard to secure our sustainable existence on the planet.
The businesses already thinking ahead, planning for what’s next and making sense of the unknown stand ready to benefit from the growth opportunities arising from the climate and energy crises. To those still struggling to survive, the good news is that respite is not as far off as you might think.
Absa was the sponsor of the inaugural The Gathering, Earth Edition – Daily Maverick’s first sustainability and climate crisis focused conference, which recently took place at the CTICC on 26 May, 2023. Faisal Mkhize, Chief Executive for Relationship Banking gave the sponsor’s address from Absa and participated in the event. Faisal shares his thoughts, as he taps into energy from discussions at The Gathering: Earth Edition, that have framed a positive outlook for South Africa. Watch Faisal’s address at The Gathering: Earth Edition, as well as all the panel discussions here.