Outdated energy model is sinking SA, says sector

August 22, 2015, 9:28am
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Outdated energy model is sinking SA, says sector

SOUTH Africa’s centralised national electricity supply and distribution model is dangerously out of date and is threatened by disruptive energy technologies, according to a review by the country’s largest manufacturing companies.

What is needed is a "credible energy policy" that enables a sustainable, globally competitive and accessible energy mix that encourages the economy’s revival in the medium term.

Such concerns have led to a "substantial" fall in business confidence, with things set to worsen, says the second-quarter review by the industry body the Manufacturing Circle, released on Thursday.

About 55% of survey respondents perceived weak-to-fragile manufacturing conditions in SA for the next two years, well up from 31% of respondents surveyed in the second quarter last year.

Disturbingly, 6% said conditions would be modest-to-good, and only 3% said they would be strong.

"Manufacturing is … gripped by a growing crisis," Pan African Investment and Research Services chief economist Iraj Abedian said in presenting the survey.

"Eskom is not the cause of our energy crisis — the problem is the absence of a credible energy policy — but energy shortages are very disruptive to manufacturing."

These shortages have led to higher barriers to entry for the beneficiation of the nation’s mineral resources. This is contrary to government’s industrial policy plans, and is reflected in the dire state of the country’s mining, steel and construction industries, which underpin manufacturing.

Meanwhile, a panel discussion held by the Old Mutual Investment Group heard on Thursday that for SA to tackle its energy, infrastructure and unemployment crises, the government and business had to work together, risking life and limb in public-private partnerships.

But former CEO of the Public Investment Corporation and director of the South African Reserve Bank Elias Masilela said the state and private sector first needed to repair the "trust gap" that existed between them.

"Until then, we cannot move forward on the practical implementation of these partnerships. We see government holding back on incentives because it considers the private sector to be too focused on profits, and we see the private sector distrusting legislation in the pipeline aimed at business."

Mr Masilela said regulation was key to the success of SA’s energy sector. "We need policy on competition — such as who produces what, from which source, and to what extent. The energy landscape should ideally be guided by market forces and this will ensure best pricing," he said.

Mark Allix BDLive