The global lending and development finance community must reassess how it perceives the risks in investment in Africa if it hopes to make the most of the momentum of the energy transition globally.
This is according to minister of electricity and energy Kgosientsho Ramokgopa, who spoke at the Africa Energy Indaba on Tuesday morning. His remarks come as South Africa is seeking funding solutions for infrastructure goals, including the development of 14,000km of transmission line.
“Capital allocation must recognise that long-term infrastructure investment in Africa is not speculative terrain but foundational development. Across our continent, renewable ambition is rising, yet generating pipelines frequently encounters a structural bottleneck in grid capacity,” he said.
Ramokgopa said transmission has emerged as the defining constraint and the defining opportunity of the energy transition, as transmission lines:
- shape economic geography;
- determine industrial clustering;
- enable cross-border trade; and
- underpin the stability of interconnected borders.
The minister’s address comes after President Cyril Ramaphosa pulled rank on him during the state of the nation address last month, announcing that South Africa’s transmission infrastructure will indeed rest with the transmission entity that is formed when Eskom is unbundled. This announcement flew in the face of an announcement by Ramokgopa in December that the Transmission System Operator (TSO) would not own the transmission assets once Eskom is unbundled, but that these would remain with Eskom.
During his address on Tuesday, Ramokgopa said no African nation’s energy security is completely against the link with integration, stability and industrial prosperity of the continent as a whole. He added that fragmented systems constrain opportunity, while integrated systems multiply opportunities.
”Energy justice is therefore inseparable from continental integration. It requires that we think beyond national grids and consider an architecture of a connected African power pool capable of unlocking scale, reducing volatility and enabling industrial corridors across borders."
Empirical evidence demonstrates that many African consumers like assets that perform reliably over long horizons, yet they are priced under these premiums that assume instability rather than resilience, he said.
“Financial structures designed to hedge and price African exposures generate returns that exceed the actual volatility of the underlying asset.”
Business Times
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