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South African Business 2019 edition

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The 2019 edition of South African Business is the seventh edition of this annual guide to business and investment in South Africa. Regular pages cover all the main economic sectors of the South African economy and give a snapshot of each of the country’s provincial economies. Feature articles on topical issues such as Special Economic Zones and African trade provide unique insights, together with comprehensive overviews of critical economic sectors. Other special features focus on the exciting new possibilities in renewable energy, airports as engines of regional growth and the maritime sector as an entirely new prospect for South African entrepreneurs and businesses. South African Business is complemented by nine regional publications covering the business and investment environment in each of South Africa’s provinces. The e-book editions can be viewed at


Gas SPECIAL FEATURE Gas in various forms is very much in the spotlight. South Africa’s neighbour Mozambique has large offshore deposits and a sub-committee of the Southern African Development Community (SADC) has been tasked with working out a master plan for the region. A study prepared by the Energy Centre of the Centre for Scientific and Industrial Research (CSIR) reports that wind and solar power (supported by natural gas, biogas and hydro-electric power) could be up to the task of providing “baseload” power. The base load is the permanent minimum amount of power that the grid must be able to deliver to keep the country working. There is special interest in natural gas as a source of a versatile and mobile back-up for the main types of renewable energy: if the sun goes behind a cloud or the wind does not blow, it is very easy to turn on the gas. This fits in well with the Department of Energy’s enthusiasm for gas-to-power. It is targeting the procurement of 3 126MW through its programme and intends spending R64-billion on port, pipeline, generation and transmission infrastructure in at three key ports, Richards Bay, Coega and Saldanha Bay. Hydraulic fracturing (fracking) has not been in the news for a long time but it has not been ruled out by the government. Controversy arose when this method of extracting gas was proposed for large parts of the central Karoo region. A bill currently working its way through parliament, the Mineral and Petroleum Resources Development Act (MPRDA), will deal with gas supplies and the contentious fracking issue. Financing The creation of an entirely new economic sector in a very short timeframe has been a boon for financing and banking. An innovative project was announced in 2018 with the bundling of five projects into one. All of the projects are being built by Enel Green Power but by creating one holding company to distribute the funds, Absa and Nedbank, the lenders, were able to reduce costs. Law firm Norton Rose Fulbright concluded the R3.5-billion financing arrangement. The support of two of South Africa’s biggest institutional investors, the Industrial Development Corporation (IDC) and the Public Investment Corporation (PIC), has been crucial in getting the renewable energy sector off the ground. They have also played a role in helping communities fund their participation in community trusts. According to Business Day, the PIC has so far invested in 16 unlisted projects and its total investment stands at R11-billion. The IDC’s 24 projects are valued at R14-billion and will contribute 1 100MW to the national power grid. Many partnerships between local and international companies have been established. South African partners are often local energy companies and representatives of residents. Typically, a community trust is established to represent the interest of the local community. Investment by black people into the RE programme is not limited to community trusts. Pele Green Energy is engaged with a photovoltaic plant at Touwsrivier in the Western Cape as a shareholder and as a provider of construction management services. Once the facility starts generating power, Pele will operate and maintain the plant. Among the international investors active are Enel Green Power (Italy), Scatec Solar (Norway), Globeleq (UK), Mainstream Renewable Power (Ireland), Gestamp Renewable Energies and Abengoa (Spain), Solar Capital (Phelan Energy Group, Ireland), SunEdison (USA), ACWA Power (Saudi Arabia), China Longyuan Power Group, (China), Engie (France), juwi Group (Germany) and Tata Power of India. The last-named company has teamed up with the energy unit of Exxaro Resources to form a company called Cennergi. Partnerships with foreign utilities or power companies are becoming more common, in part because the competition is bringing down the price which bidders are offering to sell power. This makes it difficult for South African firms to compete on their own. Many foreign investors such as large national utilities have strong reserves of cash and don’t need to borrow money. The new bank created by the five nations of BRICS, the New Development Bank (NDB), has made 0-million available to Eskom to help it integrate power from renewable energy sources to the national grid. SOUTH AFRICAN BUSINESS 2019 28

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