Investment council backs energy plan

20 May 2008

A high-level delegation of international investors has endorsed the South African government’s strategies to deal with the country’s electricity shortage.

The International Investment Council, which meets twice a year, held its first three-day meeting of 2008 with President Thabo Mbeki, Deputy President Phumzile Mlambo-Ngcuka and other Cabinet ministers in Margate south of Durban on Friday.

However, the council urged that shortcomings in the maintenance of state company Eskom’s power plants receive urgent attention and that investment in new plants be accelerated.

At the beginning of the year, South Africa was hit by power cuts, due to high demand spurred by the economy’s strong rate of growth and a continued reliance on coal as the country’s primary source of energy.

“The short, medium and long term measures seem to be working,” Investment council member Percy Barnevik told a media briefing, adding that the council was satisfied that South Africa would pull through the crisis.

For the short term, the government has requested businesses to reduce their electricity consumption by 10 percent.

Asked whether the crisis had dented South Africa’s international standing, Barnevik said the US sub-prime crisis and rising oil prices had cast a dark cloud over the world, while South Africa had continued to benefit from strong demand for commodities.

Given South Africa’s low electricity prices, the council agreed that a price increase was inevitable and necessary to encourage investment in electricity and change consumer behaviour.

Another council member, Sam Jonah, said it was reassuring that there had been a consultative process where there seemed to be broad agreement on how to tackle the problem.

At the National Stakeholder Summit on Electricity held in Johannesburg last week, it was agreed that electricity price hikes would be phased in over five years to reduce their impact.

Government, labour and community forums were represented at the summit, which said that Eskom would re-submit its application on the proposed tariff hikes to the National Energy Regulator of SA.

The delegates also said that the government should pump more money into Eskom to maintain its financial health and credit rating.

Source: BuaNews