The South African Government has been vocal about its efforts to grow domestic power generation and attain a more stable energy supply across the country. Through the implementation of its Integrated Resource Plan 2010-2030, which seeks to employ a diversified energy mix to drive new project developments, South Africa aims to revitalise its energy industry and national economy. However, such objectives cannot be achieved by government’s action alone. Speaking at the 27th Investing in African Mining Indaba conference this week, a panel of industry leaders discussed the necessity of public-private cooperation not only within the mining sector, but also the energy industry at large.
Public-Private Partnerships provide a range of benefits, including accelerated sector growth, enhanced infrastructure solutions, more relevant technical expertise and greater fiscal depth. PPP-backed developments benefit from faster project completion and reduced delays, as government can help facilitate a timely provision of public services. Meanwhile, private partners offer access to private capital, and mutual collaboration ensures that investment is directed towards projects with both tangible returns and socio-economic benefit to the host country.
“Collaborative efforts have demonstrated that if government and the private sector work together, with one clear objective, we can achieve all our strategic imperatives,” said the Director-General for the Department of Mineral Resources and Energy in South Africa, Thabo Mokoena, one the panelists.
“Collaboration starts with a minister whose heart is in the right place,” added another panelist, Neal Froneman, the CEO of Sibanye-Stillwater. “The South African minister has shown excellent engagement and substantial collaboration already. Government cannot, on its own, grow the economy. It is the collaborative effort in creating the right environment that is key. [The private sector] is not the enemy; it is part of the solution.”
Through its Renewable Energy Independent Power Producer Procurement programme, South Africa has demonstrated the success that PPPs can yield, encouraging independent producers to submit bids on the development and design of large-scale renewable energy plants to rapidly increase renewable share of the domestic energy mix. To date, 102 independent power projects have been procured from four bidding rounds, with a fifth round expected early this year. Cumulatively, the fourth bidding round in the REIPPP programme represented a generation capacity of approximately 2,300 megawatts and a total investment value of $5bn. With more projects expected to come online over the next few years, the continued success of the REIPPP in providing sufficient and secure electricity supply to the country rests on its ability to unite public and private interests.
“It has reached a point of urgency,” said Mzila Mtheniane, Executive Head, Stakeholder Affairs. “Collaboration and cooperation alone will not be sufficient. Rather, we need to see affirmative action as a result of these collaborative efforts. We need collaboration within the departments and within the mining industry as a whole.”
So, what needs to be done to facilitate public-private success? First, political will is at the forefront of bilateral cooperation. According to the World Bank, the provision of infrastructure and services by the private sector is a radical change from the status quo, and the concept of private sector management and operatorship of “public services” can function as a major deterrent to such partnerships. As a result, effective collaboration requires significant political leadership, as demonstrated by South Africa’s Minister of Mineral Resources and Energy, Gwede Mantashe. Additionally, governments must create an enabling environment, in which transparency and standardised, easy-to-navigate processes are ensured.
“At a high level, we need to be working towards policy certainty,” said Froneman. “We require good policy that is helpful and establishes an investor-friendly environment. We have to get to a point where we respect the rights of investors and stakeholders. Currently, the country does not have a common vision for the industry. It is essential that we assign a vision and work towards that in a collaborative way.”
South Africa’s success to date in facilitating new project developments and spurring industry growth can be accredited to its utilisation of public-private sector collaboration through initiatives such as the REIPPP programme. Accordingly, the country can serve as a template for other African markets looking to expand their energy sectors and facilitate socio-economic growth via the injection of private capital and expertise.
*Hundermark works with Africa Oil and Power