African Development Bank has faith in SA and Eskom
AfDB president Akinwumi Adesina backs $720m investment over the next two years
The African Development Bank (AfDB) will invest about $720m in power utility Eskom over the next two years.
The investment will include $620m in infrastructure spending on the Medupi power plant to meet global emission standards and about $100m to support power transmission in Mpumalanga.
This is in addition to the $219m invested by the bank in September to support transmission lines and the upgrading of substation equipment in Mpumalanga and KwaZulu-Natal.
“We have very strong confidence in SA and very strong confidence in Eskom. That doesn’t mean Eskom doesn’t have its challenges but it has never failed to deliver on the investments we’ve made in it,” said AfDB president Akinwumi Adesina in an interview with Business Day ahead of the Africa Investment Forum (AIF) scheduled to take place in Sandton this week.
While Adesina commended the government on the changes that have been made to the Eskom board to deal with governance issues, he said institutionally the state-owned entity still needs to be “rejigged and reformed to play a more important role”.
However, he said, the AfDB did not have any concerns about investing in it.
Eskom poses the largest burden to the fiscus, given its relative size and the strategic role it plays in supplying 90% of the country’s energy. The utility has a R350bn government guarantee, of which R255bn has been used. The cash-strapped utility has struggled to emerge from a financial crisis due to declining electricity sales, shrinking cash flow and ballooning debt which has been worsened by corruption and links to state capture.
Adesina also hailed President Cyril Ramaphosa for his commitment to a R400bn infrastructure fund. Following the release of the second-quarter GDP figures which showed that SA’s economy had plunged into a recession for the first time since the global financial crisis, Ramaphosa announced a stimulus plan to revitalise the battered economy, which included the infrastructure fund.
“The fund will enable SA to have growth and unlock greater industrial capacity. I have no doubt that the government will navigate through the recession and the government deficit,” said Adesina.
Ramaphosa had sent the message that “SA is open for business” which has been well-received and has attracted the private sector, he said. The AIF will provide a better platform for intraregional trade and investment.
“There was a decline in foreign direct investment but Ramaphosa is really trying to sell SA as a prime investment destination,” Adesina said.
The AfDB’s total portfolio in SA is $5.4bn with an active portfolio of $4.8bn, which has been invested in infrastructure. In 2018 and 2019, an additional $1.3bn will be invested in the country.