The state has been working with the International Finance Corporation to develop financing options
31 July 2024 - 19:10
by Denene Erasmus
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The National Treasury is moving forward with plans to launch a pilot project that will enable private investment in electricity grid infrastructure in 2024 as part of wide-ranging reforms by the government to increase private sector participation in the energy and logistics sectors.
The government has been working with the International Finance Corporation to develop options for financing to accelerate private sector investment in transmission without negatively affecting Eskom’s balance sheet and the fiscus, said Treasury director-general Duncan Pieterse.
Expanding the transmission grid will significantly contribute to ending load-shedding for good by allowing more new generation capacity to be connected to the grid.
...the size of the economy is unable to sustain the country’s spending priorities
Duncan Pieterse, Treasury DG
The lack of available grid connection capacity has already emerged as one of the biggest hurdles to addressing the electricity generation capacity shortage and attracting much-needed investment into the sector.
SA needs an estimated R390bn to fund Eskom’s current transmission development plan, which outlines the need to install more than 14,000km of new high-voltage power lines by 2032.
Pieterse, who was speaking at the Bureau for Economic Research’s conference in Johannesburg on Wednesday, said the transmission grid and other infrastructure investments were some of the key priorities in a broader plan to address SA’s “strained fiscal position”.
“We all know that SA is grappling with an economy that is growing slower than the growth rate of its population. As a result, real incomes of the average South African have seen a significant decline over the last 10 years or so.
“In practical terms, this means that the size of the economy is unable to sustain the country’s spending priorities,” said Pieterse.
To change this, the government had to make better policy choices to support growth and development, he said.
The Treasury’s role was to create a more supportive environment for businesses to invest by providing a stable macroeconomic framework that supports growth, implementing reforms that increase SA’s economic competitiveness, and prioritising investment in infrastructure.
As indicated in the 2024 budget, SA’s fiscal policy aims to stabilise debt and debt-service costs, which consume a larger share of the budget than social development, health, community development, economic development, or peace and security.
The Treasury expects debt-to-GDP — which is watched closed by ratings agencies to gauge the health of a country’s finances and its ability to honour its debt obligations — to stabilise in 2025/26, and debt-service costs to peak as a proportion of revenue in 2025/26.
Pieterse referred to the detailed main budget data for June that was published by the Treasury on Tuesday. It showed, he said, that the Treasury was on track to achieve its main budget deficit target of 4.3% of GDP for the year.
The Treasury was also continuing its work to implement structural reforms to improve SA’s international competitiveness.
Some of these reforms, implemented during phase 1 of Operation Vulindlela, were already bearing fruit.
Raising the embedded generation licencing threshold, had, for example,” catalysed the development of a pipeline of 22,500MW of [renewable energy] projects totalling over R390bn”.
“Unlocking investment through reforms in the electricity sector is important to end load-shedding and achieve energy security and will be the main driver of economic growth in the decade to come,” said Pieterse.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Treasury ‘on track’ with investment in power grid
The state has been working with the International Finance Corporation to develop financing options
The National Treasury is moving forward with plans to launch a pilot project that will enable private investment in electricity grid infrastructure in 2024 as part of wide-ranging reforms by the government to increase private sector participation in the energy and logistics sectors.
The government has been working with the International Finance Corporation to develop options for financing to accelerate private sector investment in transmission without negatively affecting Eskom’s balance sheet and the fiscus, said Treasury director-general Duncan Pieterse.
Expanding the transmission grid will significantly contribute to ending load-shedding for good by allowing more new generation capacity to be connected to the grid.
The lack of available grid connection capacity has already emerged as one of the biggest hurdles to addressing the electricity generation capacity shortage and attracting much-needed investment into the sector.
SA needs an estimated R390bn to fund Eskom’s current transmission development plan, which outlines the need to install more than 14,000km of new high-voltage power lines by 2032.
Pieterse, who was speaking at the Bureau for Economic Research’s conference in Johannesburg on Wednesday, said the transmission grid and other infrastructure investments were some of the key priorities in a broader plan to address SA’s “strained fiscal position”.
“We all know that SA is grappling with an economy that is growing slower than the growth rate of its population. As a result, real incomes of the average South African have seen a significant decline over the last 10 years or so.
“In practical terms, this means that the size of the economy is unable to sustain the country’s spending priorities,” said Pieterse.
To change this, the government had to make better policy choices to support growth and development, he said.
The Treasury’s role was to create a more supportive environment for businesses to invest by providing a stable macroeconomic framework that supports growth, implementing reforms that increase SA’s economic competitiveness, and prioritising investment in infrastructure.
As indicated in the 2024 budget, SA’s fiscal policy aims to stabilise debt and debt-service costs, which consume a larger share of the budget than social development, health, community development, economic development, or peace and security.
The Treasury expects debt-to-GDP — which is watched closed by ratings agencies to gauge the health of a country’s finances and its ability to honour its debt obligations — to stabilise in 2025/26, and debt-service costs to peak as a proportion of revenue in 2025/26.
Pieterse referred to the detailed main budget data for June that was published by the Treasury on Tuesday. It showed, he said, that the Treasury was on track to achieve its main budget deficit target of 4.3% of GDP for the year.
The Treasury was also continuing its work to implement structural reforms to improve SA’s international competitiveness.
Some of these reforms, implemented during phase 1 of Operation Vulindlela, were already bearing fruit.
Raising the embedded generation licencing threshold, had, for example,” catalysed the development of a pipeline of 22,500MW of [renewable energy] projects totalling over R390bn”.
“Unlocking investment through reforms in the electricity sector is important to end load-shedding and achieve energy security and will be the main driver of economic growth in the decade to come,” said Pieterse.
erasmusd@businesslive.co.za
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