Africa Seen As Investment Hub For Renewable Energies
engineeringnews.co.za | February 18, 2011 | By Chanel de Bruyn
As developing economies, South Africa and other African countries have the potential to attract strong international investor interest for the renewable-energy sector.
Africa and South Africa fall within the target zone of international investors and South Africa consistently scores high in terms of providing a conducive business and legal environment. South Africa’s energy sector is significant to the economy, as it constitutes 15% of the gross domestic product and relies heavily on the energy-intensive mining industry, says international lawyer and special adviser to the Energy Indaba Greg Nott.
Among South Africa’s strengths as a destination of choice for investors are the size of its economy, the efficiency of its financial markets, good business practices and its innovative nature. Further, international credit agency Fitch changed South Africa’s credit outlook from negative to stable in 2011, citing improved economic growth in significant sectors of the economy and resilience in the wake of the global financial meltdown, explains Nott.
“The country’s capital expansion programme got another boost in January when State-owned power utility Eskom sold $1,75-billion worth of ten-year bonds on the international market. The bond issue is a strong indicator of international investor appetite for emerging-market debt and adds certainty to the funding of Eskom’s projects. The bond offer was two-and-a-half times oversubscribed,” he says.
Further, renewable energy is recognised by government as essential to the continued sustained growth of a modern, developing economy and Presi-dent Jacob Zuma supports the call for green technologies and industries to respond to climate change.
“These are some of the factors that impact on the decision- making of corporate leaders in their strategic investment decisions,” he says.
He adds that the Department of Trade and Industry has singled out power generation, the distribution of electricity generated by independent power producers, energy infrastructure, alternative energy, solar water heating, concentrating solar heating and wind and biomass energy as significant investment opportunities in South Africa.
Nott notes that Zuma has emphasised the need for substantial investment, skills development and technologies to grow this sector and the economy. The country also serves as a gateway to Africa, as a significant player in the power sector of the region.
Initiatives on both the demand side and supply side are required. On the supply side, Eskom is actively developing renewable- energy investments, which include the Sere Wind Project and a solar thermal project in the Northern Cape. This project will unlock enormous solar potential in the country. Besides renewable projects, there are also plans for the roll-out of advanced clean-coal technologies and nuclear energy, he explains.
Legal policy plays a significant role in providing a strong framework for the establishment of an enabling environment that is needed to grow the renewable- energy sector. While South Africa has created the broad policy framework to enable investors to consider it an attractive investment destination, more needs to be done to harness the opportunities provided by the regulatory environment, he says.
“The recent activity in the renewable-energy market shows heightened interest by investors, despite what some critics may see as a less-than-perfect legal environment,” adds Nott.
The Energy Indaba will feature experienced legal experts who will tackle these issues.
“Hopefully, the deliberations can result in a constructive dialogue that further addresses the refinement of the enabling environment to the satisfaction of all who may have an interest in the market,” he says.
Meanwhile, Nott highlights that the skills shortage in South Africa, which also impacts on the renewable-energy sector, is not an issue that government alone can deal with. He urges the private sector to also contribute to alleviating this shortage.
“In 2009, the Renewable Energy Summit organised by the former Department of Minerals and Energy, now the Department of Energy, acknowledged and recognised that there was a need to implement skills development and training in the energy sector. The call was made for all stakeholders, including the government, tertiary institutions, industry associations and the private sector to work together to develop appropriate skills and training. This programme of action also called for knowledge management and awareness campaigns to give effect to the resolutions of the summit,” he adds.
Further, on January 13, govern- ment also launched the new national skills development strategy, which calls for partnerships among all stakeholders to develop skills. The strategy links skills to career paths and, because the need for skills is high on the agenda of all players in the energy sector, the Energy Indaba is expected to give effect to a programme of action.
The application of renewable technology has the potential to alleviate many of the challenges faced by African citizens on a daily basis. Access to energy is essential for poverty alleviation and the stimulus of economic growth. The Indaba has again secured the support of the World Energy Council through its hosting of the Africa regional meeting as an ancillary meeting to the main conference.
Nott notes that the regional meeting will address issues such as the alleviation of poverty and access to energy by means of innovative funding solutions, subsidies and private-sector initiatives linked to the various interests in the region.
Rural areas will only be able to tap into the growth in renewable energy if their cause is deliberated and made a priority. The Energy Indaba intends to provide a platform for innovative ideas to tackle the rural energy challenge, he says.
Nott believes that every African and South African needs to educate themselves on renewable-energy alternatives and stake- holders should make it a priority to have awareness programmes in place.
Besides these, consumer behaviour can play a significant role in the productive and efficient use of energy resources. The Energy Indaba is positioned as one of the drivers in promoting a change in consumer behaviour for the better in Africa and South Africa.
Nott will chair a session at the Energy Indaba that will look at new renewable- energy opportunities in Africa. This session will draw on the experience, expertise and knowledge of advisers, bankers and businesspeople.
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