Tag Archives: energy

Energy will be Key to South Africa’s Future

One of the key things that economic and social development in sub-Saharan Africa hinges upon into the future apparently is the robustness of its energy sector.

According to a report just released by the International Energy Agency (IEA), the current state of the industry and a lack of access to electricity by vast swathes of the population are, unsurprisingly, putting a break on economic growth.

But as the IEA’s chief economist Faith Birol explains: “The pay-off [of getting it right] can be huge, with each additional dollar invested in the power sector boosting the overall economy by $15.”

Unfortunately for South Africa though, its energy situation appears to be in a bit of a mess.

For instance, despite the damage to the economy caused by rolling blackouts across the country earlier this year, the National Energy Regulator has caused outrage by approving a tariff increase of an average 13% until 31 March 2106, up from a previously agreed 8%.

The figure is more than twice this year’s average inflation rate of 6.2% and fears are that it will put a damper on an already struggling economy that only missed going into recession last quarter by the skin of its teeth.

But the move, which is intended to help state-owned utility, Eskom, cover ZAR7.8 billion (£433.6 million) in costs that it failed to budget for in the three years to 2013, has also been met by dire predictions that it is simply a taste of more to come.

The issue is that the company, which supplies 95% of the country’s power, faces a further funding shortfall of ZAR225 billion for the five years to March 2018.

As a result, it is currently unable to come up with enough money to service the debt required to pay for the completion of two new, and very necessary, power stations in order to tackle the country’s chronic power shortages.

Last month, the government announced it would put together a financial rescue package, the details of which are due to be announced on 22 October. Ratings agency Standard & Poor’s will then decide whether Eskom’s debt situation warrants its bonds being downgraded to junk status.

Economic impact

To have any real chance of plugging its funding gap though, economists have estimated that Eskom will need to increase its tariffs by at least another 13% per year for the next five years.

But the worry is that this situation will make South Africa increasingly uncompetitive on world markets. It certainly won’t help inflation or manufacturers already hit by rising labour costs and low demand for their products.

Or consumers for that matter, who are struggling with rising food and fuel costs, high levels of personal debt and unemployment rates of around 25%.

So the situation is not good by anyone’s standards – and doesn’t get any better for reading the US Central Intelligence Agency’s World Factbook either, which would appear to back up the IEA’s report.

The Factbook indicates that South Africa’s economy will be unable to grow at more than 3% until Eskom’s new power stations come online, one by the end of this year and the other in 2017, which is obviously a while yet.

The problem is that to make a dent in poverty and unemployment, which both contribute to societal stability, it is widely accepted that GDP needs to increase at twice that rate.

Another contentious issue, meanwhile, is how the country’s electricity is to be generated in the first place.

South Africa currently produces 77% of its energy using coal. It is, in fact, one of the seven largest coal-producing and one of the top five coal-exporting nations in the world. This means that the mineral, being its third largest source of foreign exchange capital behind platinum and gold, is vital to the country’s economy.

But after getting a bad name for itself as the continent’s worst polluter and as one of the world’s top 20 carbon emitters, it pledged to take action, submitting reduction targets to the Copenhagen Accord in January 2010.

South Africa has now promised to reduce national carbon emissions to 34% below 1994 levels by 2020 and 42% by 2025 – should it get the necessary financial, technological and capacity-building support from the developed world, that is.

And so far it seems to be trying to honour that vow. Since December 2011, the country has signed off 64 renewable energy projects, including wind and solar, which equate to more than ZAR100 billion (£5.5 billion) of both domestic and foreign investment.

Energy mix

So while renewable energy accounted for less than 1% of the country’s energy mix in 2012, it is expected to hit a much more healthy 12% by 2020, jumping to 17% by 2030.

According to research released last October by analysts Frost & Sullivan, this scenario would place it among the top 15 countries in the world in terms of renewable deployments.

But it seems that President Jacob Zuma also has a controversial personal interest in nuclear. After promising to purchase a fleet of power stations in his opening address to Parliament in June, following similar statements in his State of the Nation speech in February, he made a mysterious visit to see President Vladimir Putin in Moscow last month.

Immediately afterwards, Russian energy company, Rosatom, announced that it had signed a $50 billion deal with Pretoria to build eight nuclear reactors that would generate 9.6Gw of power by 2030.

The pact was based on a “build now, pay later” vendor-financed arrangement that would see Eskom buying back energy at high predetermined rates for up to 20 years.

But the move led to an outcry, with concerns being voiced over everything from corrupt and un-transparent procurement processes to the sheer cost of the proposals, which some feared could cripple the country as tariffs skyrocketed.

The Department of Energy appeared to backtrack very quickly though, countering that the Russian compact was simply a preliminary agreement on nuclear cooperation as part of a wider tender process that would also involve other countries over the coming months.

The government has since confirmed that Eskom will not act as the owner and operator of the new power stations. This process will instead be led by the Cabinet’s energy security subcommittee, which is chaired by no less than Zuma himself – a man said to regard a nuclear power project as part of his legacy.

A businessman with historically close ties to Zuma has also intimated to South Africa’s Mail & Guardian newspaper that the decision to award the contract to Russia has already been taken, essentially making it a done deal.

But no matter how murky such a set-up may seem, what is clear is that how these various scenarios play out over the next few months will be crucial in terms of the impact on the health of South Africa’s economy for years to come.

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Waste Pickers’ Livelihoods Threatened by South Africa Going Green

Although I was aware that the pollution caused by landfill couldn’t be doing the environment much good, I hadn’t realised quite how much the methane from such dumps contribute to global warming.

According to Innocent Sibeko, managing director of waste management company, Exergy Enviro Group, and one of the African Climate Leaders trained by Al Gore’s Climate Reality Project, landfill accounts for a shocking 13% of all global methane gas emissions – and worryingly, methane is second only to carbon dioxide in terms of contributing to global warming.

Sibeko dropped his little bombshell during a presentation on possible African solutions to climate change at a recent ‘Green Drinks’ event in Johannesburg. Hosted by the South African branch of the former US vice president and Nobel Peace Prize winner’s green charity, it – rather appropriately – took place in the garden of social and environmental enterprise, Food & Trees for Africa.

But it seems the whole issue of rubbish is an important and apparently underestimated one. The most recent (2012) National Waste Information Baseline Report indicated that, while South Africa generated approximately 108 million tonnes of waste in 2011, a shocking 98 million tonnes went into landfill, with a mere 10% being recycled.

To make matters worse, the Greenhouse Gas Inventory for South Africa, which was published earlier this year, found that total greenhouse gas emissions from landfill had increased by 72% from 2000 to 2010.

As a result, municipalities up and down the country are now being tasked with trying to find solutions, not least because many of their 1,327 documented sites are starting to hit capacity.

Two of Johannesburg’s five landfill facilities, for example, currently extract, combust and flare methane in order to burn it off and get rid of it.

But towards the end of this month, there are plans to install four 1MW generators at ZAR 10 million (£555,835) a pop at the city’s Robinson Deep site near Turffontein in a bid to harness the gas and generate electricity. The scheme will be the biggest landfill gas-to-energy project in South Africa.

Gas-to-energy

Once the generators become operational early next year, Ener-G Systems Joburg, a consortium that won the 20-year build-own-operate contract, is expected to sell 5MW of power to state-owned monopoly power provider, Eskom.

This new energy source will provide electricity for 4,000-5,000 homes and cut greenhouse gas emissions by about 149,000 tonnes per annum.

But when all five landfill sites come online in future, the amount of power produced should rise to 19MW, providing enough electricity to supply a significant 12,500 middle-income households.

This situation will no doubt prove a welcome respite for Eskom, which is currently struggling to keep the country’s lights on, a situation that led to rolling power blackouts across the country earlier this year.

In a bid to stop rubbish being dumped in landfill in the first place though, the government is also keen to kick-start the recycling collection schemes now so familiar to everyone in the UK.

To this end, the goal of the Department of Environmental Affairs’ National Waste Management Strategy is to ensure that all large towns and metropolitan areas have recycling-friendly separation-at-source schemes in place by 2016.

In the case of South Africa’s biggest metropolis, Joburg, the objective is to save 20,000 tonnes of rubbish from going into landfill each year by rolling out a pavement collection service by the end of 2015.

But 20,000 tonnes would appear to be a drop in the ocean compared with the 1.6 million or so tonnes that currently end up in City dumps. It is also a far cry from the country’s pledge to divert three quarters of its recyclable materials from landfill by 2022, a promise made on signing up to the Polokwane Declaration in 2001.

While the whole municipal recycling situation is obviously still a work in progress, the City has nonetheless set up 10 “buy-back” centres to deal with what material is reclaimed.

Waste pickers

The centres house 25 co-operatives, small, medium and micro enterprises (SMMEs), which together employ about 500 people, while a further 42 garden refuse sites, about half of which are also operated by SMMEs, accept recycled waste too.

And it is on this kind of model that Sibeko’s Exergy Enviro Group operates. Based in the Vaal Triangle, an urban area about 60km south of Johannesburg, Exergy employs 27 “waste pickers” to reclaim recyclable material from landfill sites or people’s rubbish bins in order to sell it on to bigger recycling companies.

Workers are provided with training to help them identify waste suitable for the market and are encouraged to form cooperatives in order to work more effectively together.

In fact, the South African Waste Pickers Association, which is in the process of being registered as a trade union, estimates that there are about 60,000 such informal workers employed across the country, each earning on average about ZAR120 per day (£6.66).

And certainly they are a common sight around the suburbs of towns and cities in South Africa, emerging out of nowhere with their huge bags and shopping trolleys before the bin-men can arrive to see what they can find of value.

But there is growing concern among this community that, as municipalities increasingly hand out contracts to more formal waste management companies, they will be the ones to lose out – a situation that obviously threatens their livelihood and their ability to feed their families.

While former Minister of Energy Dikobe Ben Martins promised that waste pickers would be considered as part of all government waste-to-energy projects, apparently no reference has been made to them in the National Waste Management Strategy.

But there are already reports of worker numbers being cut at landfill sites – and that is even before pavement collection kicks in properly.

So it appears that the old Yorkshire adage of “where there’s muck, there’s brass” could definitely be under threat for these waste entrepreneurs who, when all is said and done, are simply trying to make a living in a country where unemployment levels remain desperate.