Electricity hikes stifle economic recovery in South Africa

Eskom being a public company that monopolises the South African energy generation sector, Eskom’s business model allows it to be able to absorb under-recovery of revenue from its customers. “An increase in competition in the form of private sector companies into the industry would force Eskom to rethink their business model,” says Muneerah Salie, industry analyst for energy and environment at Frost & Sullivan Africa.

“The question that remains is for how much longer the average consumer will be able to pay for, or afford, these tariff increases. Currently, municipalities across the country owe Eskom about R3-billion. Taxpayers that are paying their accounts every month might feel that they are being unfairly penalised by having to compensate for those customers that are defaulting on payments. Privatisation of the industry would allow Eskom to develop a more efficient system with a more accurate invoicing and debt collection system.”

Salie says the additional tariff increases are potentially unaffordable for the average South African consumer. “It is also expected that businesses will suffer, with many companies already taking drastic measures in order to remain profitable. Tariff adjustments play a large part in the sustainability of the South African economy and this additional increase is unlikely to aid in economic growth.”

South African engineers win Mali gold mine contract

Gold and exploration company Hummingbird Resources has appointed South African project management firm Senet as engineers for its processing plant and associated infrastructure at its Yanfolila gold project in Mali.

Senet has extensive west African experience, as well as over three years on the Yanfolila project for Gold Fields before Hummingbird took it over. According to Hummingbird CEO Dan Betts, the contract was awarded after a competitive tender process where expressions of interest were received from a number of globally recognised consultancies..

South Africa: Skills needed to grease growth of oil and gas sector

South Africa is ideally positioned to become a major hub in the booming oil and gas sector on the continent, but a huge global shortage of skills exists in the industry, especially at middle management and executive levels, says Guy Lundy, a principal at global executive search firm Odgers Berndtson.

While local universities do produce “excellent” geologists and engineers, Lundy says the country also needs to encourage training in other relevant professions such as accountants, lawyers and tax specialists who understand the oil and gas industry.

He says universities should offer more industry-related courses and attract students from all over Africa and companies active in the sector need to focus on mentorship to enable the upskilling of young people.

Lundy suggests that government play a crucial role in opening up South Africa to foreign skills – companies should be incentivised to facilitate the entry of skilled foreign management, who can ensure the transfer of skills to local employees.

Britain to fund South African carbon trading experiment

Britain will expand funding for a programme to help coal-rich South Africa develop a carbon trading market in an attempt to rein in its rising greenhouse gas emissions.

The British High Commission in Pretoria last week said it will fund a pilot emissions trading programme from next year to help companies prepare for a 120-rand-per-tonne ($11.21) carbon tax that is expected to come into force in 2016.

The value of the grant was not disclosed.

The launch of South African's carbon tax, which would apply to major emitters including steel giant ArcelorMittal, utility Eskom and petrochemical group Sasol, was delayed by one year to allow more time for planning and consultation with stakeholders.

The South African government earlier this year said major emitters will be allowed to use carbon offsets, which could be generated by investment in domestic or possibly regional clean energy sources, to help meet their tax obligations.

The British High Commission's grant, awarded through its Prosperity Fund, will for a second time go to Johannesburg-based Promethium Carbon.

"Funding from the Prosperity Fund will assist to fast track the development of a local carbon trading system in preparation for the carbon tax," said Robbie Louw, a director at Promethium.

Promethium was first selected by the Commission to carry out a 2013 preliminary study as to whether a carbon offset market could complement the tax and help ease costs for industry.

Promethium said the first phase of the study found such a market could function, so a second phase, expected to conclude next February, will focus on how to start trade and on launching a pilot market on the Johannesburg Stock Exchange from 2015

Promethium estimates South African offsets could reach prices of around 80-100 rand ($7.48-$9.35) per tonne in the first couple of years of the market's existence – or nearly 20 times the value of credits offsets in the U.N. carbon market, the world's largest and most liquid.

More than 80 percent of South Africa's soaring greenhouse gas emissions come from its energy sector, which is heavily reliant on coal – one of the country's major exports.

Expected to be phased in over time, the country's carbon tax is one of several initiatives, including a biofuels production incentive and higher vehicle emission taxes, which South Africa wants to launch to help reduce its growing carbon footprint.

($1 = 10.7009 South African Rand)

Source: Reuters