African Power Projects Should Look Past Conventional Funding

Africa should rely more on local resources, including finance and skills, to develop its power projects
Published: Wed 09 Jul 2014

 

The lack of investment in the power sector is a major concern for the National Energy Regulator of South Africa (NERSA) as they have to regulate and increase prices at a time when the infrastructure is not performing optimally and there is no increase in available power. This is according to Phindile Baleni-CEO, National Energy Regulator of South Africa, who says that this is a major concern and that it must be resolved soon.

Mobilizing African funds

“Even where there is regulatory stability, unbundling of the industry, separation of distribution from generation and the creation of independent systems operators, there is still no additional investment. Tariffs have also been adjusted to be more cost-reflective but this has also failed to gain investor interest,” explains Baleni.

She explains that Africans are going to have to question conventional wisdom about what it will take to attract investment. She says, “It is very frustrating because although the projects are bankable, it never goes further than that. Money is just not flowing through.”

Baleni believes that filing of risks by current financiers is not fair and that this may be hindering the development of projects. To circumnavigate this, she explains that Africans will have to mobilize African money to bank African projects. Educated Africans, who are skilled in asset management and venture capital funding, will have to adopt a complete mindset change.

“I am beginning to realize the value of African communities. We will need to look into local resources and rely less on conventional funding that has so many conditions we never seem to meet.”

Filling the energy skills gap

In response to the skills gap in the power industry, the National Energy Regulator of South Africa has developed a Learnership Programme. The project, which is now in its second year, has been launched in response to the acute skills gap in South Africa’s power industry.

Because there is no college for regulators, the National Energy Regulator of South Africa has to manufacture their own skills set.

Regulation requires four disciplines:

  • Economics

  • Finance

  • Legal

  • Technical

The National Energy Regulator of South Africa approaches universities for potential applicants and the response has been great thus far, says Baleni. “There are a number of qualified lawyers and engineers who don’t have jobs and through this program, the National Energy Regulator of South Africa is able to get people up to speed and to the point where jobs are available to them at the National Energy Regulator of South Africa and in the regulated industry.”

Baleni points out that before this program, staff turnover was high because people didn’t understand what the job entailed. The National Energy Regulator of South Africa has also been busy rebuilding the public sector image. Many young and qualified students are not even aware of the existence of the National Energy Regulator of South Africa.

Techno girls is another program that the National Energy Regulator of South Africa joined three years ago. The program, accredited by the United Nations, aims to encourage and mentor young girls from disadvantaged communities. The young girls are introduced to a number of companies representing the energy industry. Baleni says that the success rate of this program is very high.

Independent Power Producers

“South Africa’s energy sector is in a good place and we are heading in the right direction. We have improved our planning, got an integrated energy and resource plan. Institutionally, we haven’t moved much so we still have a vertically integrated monopoly that dominates generation, transmission and the distribution business but eventually, Independent Power Producers will compete with the current incumbent. This is definitely in the pipeline.”