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ESKOM
Working together for LIGHT
Posted Thu, 03 Mar 2005

African power utilities must work together to find a solution for the continent's current electricity problems. These were the words of Dr Enos Banda, Chief Executive of Eskom Enterprises at the Eskom African Business Leaders Forum.

The African continent, except for a few places on the coast and a little on the northern part, is essentially dark. Before I had the good fortune of visiting Saudi Arabia, I always made the excuse that it is understandable that it should be dark in the middle - especially in the Sahara Desert - because it is desert. That is not an excuse. Saudi Arabia is a desert and it is more lit than most parts of our continent. What is wrong with this picture is that the technology, the resources, the will, and in fact, the ability to light up the African continent does exist. Our continent represents a huge question mark and also a leadership challenge in the energy sector - one that must be answered positively and with resolution.

Back log

Our share of the global energy consumption is small and yet we remain the most populous continent by comparison to those regions in the world which consume the most electricity. The African continent shares two percent of electricity in comparison to the Middle East at three percent and yet has more than 10 times the number of people in the Middle East.

A most fundamental question arises - whose responsibility is it to provide electricity and energy sources in any given country?

I must come to this very simple but important conclusion, that the provision of electricity is not a discretionary or private matter, but a matter which must fully engage government, especially on our continent. The reason for my view is that the generation and the sources of electricity involve a number of principle things.

Firstly - primary energy sources. Whether it is water, nuclear, oil, gas or coal, the regime that makes these energy sources available, and the pricing of these energy sources, becomes quite critical to a successful implementation of generation capacity.

Secondly - it is a critical element for us on the continent that government is involved in the provision of electricity and the investment in the development of resources.

There is a global standard that says that for each and every megawatt you generate, you should anticipate to pay about a million dollars in installed capacity. And when we look at the needs of our continent, which runs in the order of nearly 60,000 megawatts, to nearly satisfy the continent's energy needs, we are looking at about US$60 billion. Africa's GDP is not even close to that. With these sort of numbers staring us in the face, and the importance of moving and alleviating our people from the picture of darkness into one of light, means that our governments are invariably going to have to be intimately involved in assisting in the development of the industry.

It is not only about developing and enabling a legal and regulatory environment, but a number of other things must also be done.

Regulatory environment

First, we as business leaders must focus on creating regional, if not an inter-continental regulatory parity, so that there are minimum standards of cross- national regulatory regimes that will make investment across regions possible.

When I was in the regulatory sector, we had first-hand experience of the importance of the Eskom Group, together with its counterpart in Swaziland and Mozambique, when we sought to develop a transmission network to supply an aluminium smelter in Mozambique - the Metraco Transmission Line. In that particular project, as regulators in the three regions, we actually had to create from scratch a contractual regulatory regime to make sure that the transmission network actually could exist in three countries.

The reason is a very simple one. If a transmission line is cut in any one of the three countries, the effect is felt in all three. The regulation thereof cannot be of a discretional and intimated nature but it must be continuously set up and enabled through a permanent regulatory regime and framework.

Investment

When it comes to investment, it is a little bit of a chicken and egg situation. Investors normally first want to see what can be done in a country before investing in it. But, on the other hand, one needs investment to develop infrastructure. When you look at the African continent that sort of argument can be made continuously and consistently with the following devastating effects. Those countries that don't have visible investments and projects, hardly receive any investment. On the other hand, those countries that show a robust and clear potential for investment because of existing projects, usually attract most of the investment. If you had to do a map of the very little foreign direct investment (FDI) that has been directed to Africa, you will find that most of it is directed at those countries which has already demonstrated a platform for democratic growth. And yet, the challenge is whether investment stimulated growth and therefore investment in that growth is not visible or whether you must invest in a growth that is already clear.

It thus means that our government needs to create an environment in which this, question is answered in a partnership environment where the will of the government, and government's ability and intent to present results to the investment community is clear. In the case of the South African government, it has insisted that, in lieu of accessing the richer parts of South Africa, the strategic equity partner in the1 telecommunications provider had to roll out a telecommunication network into the poorer parts of the country. The result has actually been short of the miraculous, in that the growth that has been mapped, demonstrated that those areas that have been written off in the discussions and negotiations currently show clear signs of viability from a telecommunication consumption level.






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