South Africa Says Private Companies to Add Four Gigawatt to Grid by End 2024

(Bloomberg) -- South Africa expects private companies to add more than 4 gigawatts of electricity generation capacity to the grid by the end of 2024, as the government accelerates efforts to increase private sector participation in its power, rail and water industries.

Presentations released on Tuesday by Operation Vulindlela, a unit run by the presidency and the National Treasury that aims to remove blockages to investment, showed the measures the state is taking in a bid to compensate for the deterioriating performances of state-run companies.

Private operators will be allowed to use state freight rail tracks, partners will be found for container ports and a unit has been established to encourage private sector investment in water projects.

South Africa’s state companies are in a dire state. The country is suffering power cuts of more than 10 hours a day because Eskom Holdings SOC Ltd. can’t meet demand. Coal railings to an export port were at a 30-year low last year and a key track from the main port is operating at 25% of capacity because of rampant cable theft. Cholera is spreading in the capital, Pretoria, where a key waste-water treatment plant has been neglected.

“The primary focus is on addressing the electricity crisis and improving the efficiency of freight rail, both of which are weighing heavily on economic growth,” Khumbudzo Ntshavheni, South Africa’s minister in the presidency, said in a statement. 

Decrees in 2021 and last year that removed caps on the size of power plants that companies can build for their own use has resulted in 108 projects with a combined capacity of more than 10 gigawatts being registered for construction, Operation Vulindlela said. Of those, more than 1 gigawatt will come on line this year and more than 3 gigawatts in 2024.

The presentations didn’t address a chronic shortage of transmission capacity that has hindered attempts to boost the amount of available electricity, with a government tender for projects flopping in December. 

In the next quarter, an Electricity Regulation Amendment Bill will be introduced to parliament to establish a competitive electricity market. A board will be appointed for the National Transmission Co., a planned unit of Eskom, that will oversee the national grid.

The government unit said that Transnet SOC Ltd., the state ports and freight rail company, will by the end of October create an infrastructure manager to allow private companies to run trains on key freight tracks. Those rail lines move cars, metals and coal to ports and import fuel and automotive parts.

Forfeited Earnings

The country forfeited 150 billion rand ($7.6 billion) in exports last year because of the poor state of its rail infrastructure, the Minerals Council South Africa, which represents most mining companies in the country, said in its annual report. The lobby group, based its estimate on the design capacity of rail lines to ports compared with annual shipments.

Last year, its members shipped 51 billion rand less of commodities than they were contracted to, compared with a loss of 35 billion rand in 2021.

Transnet also expects to form partnerships with private operators at the Durban Pier 2 Container Terminal, part of Africa’s biggest container port, and at the Ngqura Container Terminal in the coming months.

The government is also helping Transnet to seek additional locomotives and is pushing law-enforcement agencies to reduce cable theft that’s idling sections of the Container Corridor, which carries goods to and from the port at Durban and the industrial hub of Gauteng. 

A Water Partnerships Office has been established in the state-owned Development Bank of Southern Africa to boost private participation in water re-use, wastewater treatment, desalination and sanitation projects, the unit said. 

A bill will be submitted to parliament in the third quarter regarding the creation of a National Water Infrastructure Agency, a state company that will be responsible for the planning, finance and development of water infrastructure, it said.

“These reforms are necessary both to address the immediate challenges that we face, and to drive a fundamental transformation of our economy in the months and years to come,” the minister said.

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