By Mervyn Naidoo, ACTOM
Post-election periods in South Africa often see a renewed focus on infrastructure development, with a specific emphasis on directing investments towards the energy sector. This strategic approach aims to accelerate economic growth, address energy challenges and ultimately uplift the overall standard of living for the populace.
This renewed emphasis is crucial for addressing the country’s urgent requirement for reliable and effective energy distribution, which is fundamental to industrial expansion and societal welfare. Investments in the energy sector are essential for sustaining economic momentum and ensuring that growth translates into tangible benefits.
Encouragingly, with the new administration in place, we are beginning to see progress in policy direction within the energy sector, particularly regarding Independent Power Producers (IPPs), the transformation of the electricity sector, and the establishment of the National Transmission Company of South Africa (NTCSA).
The NTCSA essentially paves the way forward for a competitive landscape in terms of independent power generation, allowing the private sector to compete against Eskom. So, policy direction not only opens the door for competition but also facilitates the acceleration of private-sector projects in the generation space.
Awaiting policy clarity
Many private sector companies have maintained cash reserves on their balance sheets but have been awaiting policy clarity before committing to investments. Now that the elections have concluded and the Government of National Unity is in place, we are beginning to observe a more positive investment sentiment.
What this means is that massive projects on the transmission side will come onstream, including infrastructure development such as transmission lines and substations. This will stimulate the construction industry through the construction of transmission substations, transmission line structures and associated developments.
These projects will stimulate a massive demand for equipment and materials such as overhead conductor, transformers, high-voltage equipment, protection & control systems, switchgear and all the associated products that go into this infrastructure.
This will then culminate in massive demand across the whole supply chain, which has the potential to trigger a massive stimulation of our economy. The further benefit is that jobs will be created across many cities due to the geographic span of the required capacity development.
Prioritising investments in the energy sector is critical for driving economic growth and improving living standards in South Africa because industries rely on electricity and energy. Without energy, we cannot industrialise the economy, so the basic needs of industry must be met, which means providing a power supply that is stable, available, and ultimately also cost-effective.
Industrialisation drives Gross Domestic Product (GDP) growth by creating employment and broadening the tax base, all of which leads to the benefit of the broader society and improved general standards of living.
Addressing pressing issues
In addition, the renewed emphasis on reliable and efficient energy delivery addresses several other pressing issues as well. For example, without a reliable electricity supply, businesses must install backup power, which increases the cost of doing business and reduces competitiveness. A stable power supply reduces input costs while improving efficiencies, boosting the bankability of investments and the sustainability of businesses.
Ultimately, the post-election emphasis on infrastructure development offers opportunities for aligning governmental priorities with national development goals, because of the realisation by the government that the key to economic growth and job creation is infrastructure development. Large-scale infrastructure projects will drive investment into equipment and construction which, in turn, will create demand and increase economic activity across the country.
Strategic investments and the implementation of modern, efficient energy systems are necessary to meet the growing demands of both the population and industry. By investing in robust and efficient energy systems, the country can drive economic growth, improve quality of life, and build a more resilient and sustainable energy future.
