It has indeed been a tumultuous few years for the energy industry in South Africa, from the delay in the release of the country’s Integrated Resource Plan (IRP) – which is essentially the road map of our energy future – to uncertainty around the signing of PPAs that would progress the renewable energy programme, to talks of nuclear energy potentially dominating the energy mix, to board changes at Eskom, SA’s electricity public utility.
But 2019 will hopefully be the year where a new energy dawn is on the horizon. The IRP is due to be released in the first quarter of this year with a large focus on renewable and gas. The ANC is recognising the need for change and restructuring with Eskom and dedicating resources to upskilling and training people to deal with renewable energy. The future is beginning to look bright(er).
In this article I’d like to examine some key stabilisers for the SA energy industry that we can look forward to in 2019, and address what energy companies should start considering in order to ensure they take full advantage of the opportunities that the industry will be presenting us with.
Increased stability within Eskom
In early December President Cyril Ramaphosa deployed a task team led by Prof Anton Eberhard to help Eskom address some of its critical issues. Although two resignations have already taken place, citing conflict of interest and insufficient capacity in terms of time to be able to serve effectively, the task team is well under way and is expected to issue a report by the end of January.
The team has been given a broad mandate that includes assessing the appropriateness of the Eskom business model and structure. It will also review a turnaround strategy submitted by the board, including “key assumptions, impact on tariffs and industry, and viability of proposed solutions on the future role of Eskom”, according to the presidency’s announcement statement. Should this task team prove to be successful, we could see a marked difference in the way Eskom operates, reducing the burden this state-owned utility is putting on business and the country. In addition, it will also help to improve investor confidence, guide policy certainty and secure a more carbon-friendly future for SA.
South African Energy Minister Jeff Radebe recently stated that the ministry is aiming to finalise the IRP in February, after which another round of renewable energy deals will be launched. However, some remain sceptical of the IRP’s imminent release, as it is believed that the National Economic Development and Labour Council (Nedlac) will still need to sign it off. The release of the long-anticipated IRP will further enhance investor certainty, provide a clear road map for South Africa’s energy future to 2050, and pave the way for the impending gas-to-power programme. The IRP examines three scenarios between now and 2050 and how the energy make-up in the country could look based on low, medium and high economic growth. We see that coal is dying, nuclear is a prospect in the very distant future, and gas is growing exponentially along with renewables.
Impact of SA’s government elections on the energy sector
In May 2019, SA will hold General Elections to elect a new National Assembly and new provincial legislatures in each province. The ANC is expected to retain power, and from its recent manifesto, which was launched on 12 January, energy security and the transition to renewable energy seems to have moved up higher on the agenda. The party’s 2019 manifesto has committed to:
- Continue to support the use of renewable technology in the country’s energy mix to reduce the cost of energy, reduce greenhouse emissions, build the local industry through increased localisation, and create jobs
- Take forward Nedlac’s Green Economy Accord on renewable energy by ensuring that workers are reskilled and treated fairly and that the needs of the people and the environment are at the centre of a just transition to a sustainable and low carbon energy future
- Develop and implement a dedicated renewable energy education and training programme targeting young people
- Contribute to investment to boost greater demand in the energy sector
- Reposition Eskom to play an active role in the renewable energy sector and promote public ownership in renewable energy infrastructure
|What energy companies should keep in mind for 2019
Define your purpose and live it: At Hill+Knowlton Strategies we have worked with numerous companies to help them to identify their purpose, their raison d’être, their truth. When times are tough, companies that are driven by a solid purpose tend to outlive companies that purely focus on the bottom line. Your purpose becomes your key differentiator. Purpose expresses what your organisation aspires to be and do. But at a more advanced level, it becomes a conscious expression of how an organisation intends to evolve and transform itself.
In times of uncertainty, get agile: If there is one thing energy companies operating in South Africa have come to understand over the years, it is resilience. From policy uncertainty to industry delays, companies have had to learn to rise to the occasion and do what is necessary to stay in business. We can learn from the past by preparing for multiple scenarios, building brands that are resilient and innovative in tough times, and preparing for disasters. Be ready for the upward swing because when the industry gets moving, you don’t want to be on the back foot.
Speak your truth: Develop messaging that resonates with your audience and communicates your purpose. Authenticity is key, so make sure your actions reflect your purpose.
- Investigate the cost benefit of introducing solar panels in state buildings and mandate new commercial and residential developments in the medium term to use renewable energy technologies to reduce utility costs.