South Africa has a governance crisis – not an energy crisis

Energy analyst, Chris Yelland, said that the current crisis in South Africa is not an energy crisis but rather a crisis of government. 

Yelland made these comments during a webinar hosted by Citadel Wealth Management. 

South Africa is rich in energy, both in terms of natural resources and human resources. The central issue is the question of how those resources are used, which is political. 

If the country does the right things for a long time, load-shedding will become a thing of the past. 

The chief economist of Citadel, Maarten Ackerman, agreed with Yelland, saying that the government has the right ideas but struggles to implement them due to politics. 

The problem is fundamentally political and thus requires a political solution.

The solution is simple

Both Ackerman and Yelland commended the government’s actions for allowing private generation of electricity and the tax breaks announced in February’s budget. 

What is required now is for the government to get out of the way and allow the private sector to invest in electricity generation. 

What the private sector wants, according to Yelland, is policy certainty and a stable macroeconomic environment. 

South Africa has had eight macroeconomic policy frameworks in the last 25 years. It has two operational frameworks – the National Development Plan from 2012 and the Economic Recovery Plan from 2020.

Investors now also have to contend with an electricity minister “making policy on the hoof”, Yelland said. 

This creates uncertainty around the government’s energy policy which scares off local and international investors. 

The private sector needs a consistent, clear, and thought-through policy to invest in electricity generation and solve the energy crisis. 

According to Ackerman, with clear policy and a stable macroeconomic environment, the energy crisis will eventually be solved by the private sector, with a significant impact felt within 12 months. 

Government’s response

Head of the Presidency’s Project Management Office, Rudi Dicks, also attended Citadel’s webinar and offered a response to Ackerman and Yelland. 

Dicks is intimately involved in the government’s efforts to solve the energy crisis through Operation Vulindlela. 

The energy crisis is the government’s top priority, and it is making substantial, albeit slow, progress in solving it, said Dicks. 

He pointed to the complete removal of licensing requirements for private generation and the tax breaks announced by the finance minister as evidence of the government’s action. 

The tax breaks are just the start of the government’s efforts to incentivise individuals and businesses to generate electricity. 

A feed-in tariff whereby the government will pay for surplus energy from individuals and businesses fed into the grid is under discussion and will be implemented soon. 

Dicks pointed to efforts by the City of Cape Town as an example of how such a solution can be implemented on a wider scale. 

Although Dicks emphasised the government’s urgency in tackling the energy crisis, he did caution that it would take a long time to solve.