South Africa could get a cash injection to deal with its crippling energy crisis with the country set to be one of the beneficiaries of an initiative by global leaders to raise trillions of dollars to triple clean energy investment in emerging economies.
At the World Economic Forum (WEF) 2024 Annual Meetings in Davos this week, more than 20 ministers and CEOs joined an alliance to unlock the funding needed for the Global South’s clean energy transition.
The “Network to Mobilise Clean Energy Investment for the Global South” is made up of CEOs and government ministers, including from Colombia, Egypt, India, Japan, Malaysia, Morocco, Namibia, Nigeria, Norway, Kenya and South Africa.
The network will provide a collaborative space for its members to accelerate clean energy capital solutions in emerging market contexts – through innovative policies, new business models, de-risking tools and finance mechanisms – and exchange best practices for attracting sustainable flows of clean energy capital.
Head of the WEF’s Centre for Energy and Materials, Roberto Bocca, said accelerating the clean energy transition was imperative to address climate emergency, but current investment levels remained far below the scale.
“Unlocking this financing today is not only a key first step towards a secure and equitable energy system tomorrow, but represents a clear opportunity for businesses, as emerging economies account for the lion’s share of the global population,” Bocca said.
This comes as energy supply shortage was identified as one of the top five risks facing South Africa by the latest Executive Opinion Survey (EOS) of the WEF.
The Global Risks Report 2024 also named economic downturn, unemployment, State fragility, and water-supply shortages as challenges that were the most likely to pose the biggest threat to South Africa in the next two years.
The long-standing energy deficit in South Africa has forced Eskom to implement up to 10 hours a day of rotational power cuts, which has crippled business and economic activity as the state-owned electricity utility doesn’t have the balance sheet to fund new generation projects.
The WEF also released a report that outlined a framework to guide policy-makers and business leaders from the energy sector towards a just, equitable and inclusive energy transition, particularly in developing economies which account for less than one-fifth of global clean energy investments.
Egypt’s Minister of International Cooperation, Rania A. Al-Mashat, who will co-chair the network that will oversee this, said the overall annual investment in clean energy in the Global South needed to triple from $770 billion (R14.6 trillion) currently to $2.2-2.8trl by the early 2030s.
Al-Mashat said while recent spending had increased, it remained concentrated in a few countries and sectors, with over 90% of investment growth having occurred in advanced economies and China since 2021.
“The network will play a crucial role in bringing together public and private players to pinpoint investment needs, breaking down barriers, and unlocking practical solutions for a just, equitable and sustainable energy transition in the Global South,” Al-Mashat said.
“This will be a new space for emerging economies to exchange best practices and lessons learned, and foster collaboration around value chain strategies, regulatory policies, and investment mechanisms.”
Minister of Electricity Dr Kgosientso Ramokgopa, prior to the WEF, said they were working on presenting a compelling case to attract foreign investors to plough money into expanding South Africa’s electricity transmission network in a bid to deal with the energy crisis.
South Africa needs about R390bn to aggressively expand and strengthen its transmission grid with about 14 000km of new power lines to accommodate renewable energy that is coming online.
Standard Bank Group CEO Sim Tshabalala, in an interview with CNBC Africa on the sidelines of the WEF meetings, pleaded with leaders in South Africa and across the continent to make it easier to do business in their countries by reducing red tape and liberalising their economies.
He also urged African countries to reduce the risk premium associated with investing on the continent by making it easier for goods, people, and ideas to flow across the continent, implementing fiscal discipline, and making it easier to do business.
“Please improve the quality of our institutions. In the case of South Africa, we use the lovely phrase ‘Please capacitate the public sector’.”
“Some parts of the public sector are excellent, such as the National Treasury and the Reserve Bank. Replicate what is happening in those across the board. Please capacitate the state. Please professionalise it. Please continue to make doing business easier.”
The WEF gathering took place against a backdrop of increased geopolitical tension, especially in the Middle East, and in a record election year with more people than ever being able to head to the polls in 2024.
BUSINESS REPORT