Less talk, more action: solving SA’s energy crisis

The global focus on achieving sustainability imperatives that provide businesses with the social licence to operate is gaining similar momentum in SA. Building a green economy, where corporate SA conducts its business in a sustainable manner, is rapidly becoming table stakes in attracting foreign investment. 

A recent FM Green Economy conference, in partnership with Old Mutual Investment Group (OMIG), discussed the shift towards cleaner industries and renewable energy solutions to realise economic growth, competitiveness and inclusion. 

Tebogo Naledi, MD of OMIG, put the spotlight on capital allocations and how investment managers can drive impact through the listed market. He said SA’s policies are doing little to fast-track a just energy transition.

If the country is to meet its intended carbon emission reduction targets, it needs to urgently implement actions that will make a meaningful difference, given the growing demand from trade partners to reduce their carbon emissions. 

Demand for responsible finance is intensifying with policy interventions growing exponentially in the past 20 years, said Naledi. Despite policy interventions and greater demand from managers, he warned of a tendency by some companies to greenwash their ESG claims. 

He said OMIG, which manages more than R400bn of investments, believes in responsible investing. A transition to a low-carbon society needs to consider that SA is an emerging market and that disinvesting in fossil fuels overnight is not a good idea.  

“Our priority is on ensuring the transition to net zero is just and that we achieve real world decarbonisation,” he said. 

Matthew Cruise, head of public relations and business intelligence at Hohm Energy, a solar solutions and financing business, discussed Eskom‘s position after the president’s state of disaster announcement and the budget speech. 

Delays in the unbundling of Eskom and the democratisation of the energy sector, coupled with corruption and a lack of incentives for private power producers to supply the grid, don’t auger well for the energy sector, said Cruise. 

Conservative predictions are that load-shedding will double over the next five years. Energy prices are also projected to double over the same period as the cost of diesel continues to rise. 

In Vietnam, a government-driven solar photovoltaics incentive scheme was very successful. Key to the initiative's success was the government's commitment to a long-term feed-in tariff which provided measurable financial returns. SA, however, determines the price of electricity every two years. “If we want to encourage and incentivise funding, we need to confirm the price of electricity for the next two decades,” said Cruise. 

A panel of experts discussed how to solve SA’s energy crisis through renewable energy. James Cumming, GM of renewable energy company African Clean Energy Developments (Aced), said renewables can only do so much until battery storage improves. Solving the energy crisis requires that Eskom’s fleet of power stations performs optimally while getting renewables on the grid.

Though Aced has a number of renewable projects in the pipeline, he said precedence needs to be created to get projects online quicker.

Neither green hydrogen nor gas energy projects are an ideal solution to the energy crisis, given they both take a long time to implement, said Cumming. 

Jan Fourie, Sub-Saharan Africa executive vice-president at renewable energy producer Scatec, said we need to accept that Rome is burning, which requires urgent concrete action rather than more meetings. Not only do we need all hands on deck to fix Eskom, expand the grid and get better at implementation, but the gloves need to come off in the relationship between the government and private sector. 

He said the problem with nuclear power is that projects are always over budget and take longer to build than expected. Given the failures at Kusile and Medupi power stations, SA should not mortgage its future for nuclear energy. He said focusing on gas to solve SA’s energy crisis was a similar fool’s errand. 

Kyle Durham, head of sustainable finance and ESG solutions at FNB, said sustainable finance for commercial businesses is still a new concept. Though a significant amount of capital has been pledged, he questioned whether it was going to the right projects. He conceded that commercial banks need to play a more active role in procuring solutions for customers. 

Franc Gray, the chief lending officer at Hohm Energy, said though capital is available, it is not deployed timeously into the right areas. He called for better transparency of the value chain. Hohm Energy is primarily focused on providing solar solutions and finance to the residential sector. Gray revealed that SA is short of solar installers. 

Watch the full discussion below: 

A second panel discussion put the spotlight on driving investments into the green economy with a focus on using green local production and resource efficiency. 

Robert Lewenson, head of responsible investment at OMIG, said responsible investing is a driver of green economic growth. He said OMIG allocates capital that makes a positive impact. There is a growing acknowledgment that material risks can have a significant impact on a business. However, SA requires more shareholder activism. He said ESG and sustainability metrics need to be incorporated into the remuneration of CEOs. 

Diana Sibanda, group head of sustainability at Coca-Cola Beverages Africa, said sustainability is about doing business the right way and that a world without waste is possible. 

“Gone are the days that sustainability is merely the right thing to do. It’s become key to our survival. We recognise that without water there is no Coca-Cola. Water is a resource that we can’t replicate, which is why we need to protect our water sources.” Coca-Cola has committed to replenishing 100% of the water it uses in terms of sales volume. 

Shabeer Jhetam, CEO of The Glass Recycling Company, the producer responsibility organisation for glass packaging in SA, said while recycling used to be a “nice” thing to do, environmental legislation has pushed companies to focus on sustainability and environmental issues.

Extended producer responsibility legislation, which requires that producers assume responsibility for the end life cycle of the packaging they use, has changed the mindset of corporates who are starting to realise sustainability has advantages. 

Richard Kriel, the strategic projects & sustainability manager at Heineken SA, said while profits and productivity were the key focus areas for most companies a decade ago, there has been a growing realisation that ESG is material to bottom line. The challenge in SA is that most boards don’t understand ESG goals. “Sustainability is not a one size fits all and getting to net zero, particularly in SA, will be a challenge.” 

He said Heineken SA is focused on water usage and efficiency; opportunities for circularity; and water re-use. The business has committed to putting 1.5l of water back into the water shed for every 1l it uses. 

This article was sponsored by Arena Events.