South Africa is one of Africa’s largest economies, with robust manufacturing, mining, and agriculture sectors. It is also an important financial center, a digital innovator, and a hive of artistic creativity.
And yet, the country’s struggling power infrastructure is preventing a bright economy from really dazzling.
During a recent visit to South Africa, I met with public and private sector partners to affirm IFC’s commitment to deepening its support for the country’s private sector development agenda.
Energy transmission was an important focus of our meetings, with discussions centering on how private investment can buttress government efforts to build some of the vital power infrastructure the country needs.
Challenges associated with generating power often grab the headlines, but the transmission challenge is an equally urgent global issue: countries around the world need to add or replace about 50 million miles of transmission lines by 2040 to meet their climate goals and to achieve energy security, according to a recent report by the International Energy Agency.
In South Africa, the transmission grid needs significant investments to be able to absorb new generation capacity, especially from renewables.
South Africa’s Minister of Energy and Electricity, Kgosientsho Ramokgopa, and I discussed the country’s energy challenges and opportunities, particularly around transmission and distribution infrastructure, which includes the lattice towers, poles, high-voltage cables, and transformers that bring power to homes, schools, businesses, and hospitals.
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South Africa’s government has already opened up generation to the private sector through the Renewable Energy Independent Power Producer Program. This has yielded notable results: since 2011, over 6,000 MW of wind, solar photovoltaic, and other renewable energy generation capacity has been acquired.
However, Eskom, the state utility, is solely responsible for the country’s transmission infrastructure development and maintenance.
This may soon change.
South African President Cyril Ramaphosa signed the Electricity Regulation Amendment Bill in August 2024, which implemented far-reaching energy sector reforms aimed at establishing a competitive electricity market, including transmission.
The country’s transmission requirements are undoubtedly enormous. To meet its energy needs, the country will need to build approximately 1,400 kilometers of new transmission lines per year for the next ten years. This equates to approximately $10 billion in investment in lines and associated infrastructure to improve and expand the power grid.
The investment and capacity needed to meet the energy gap are huge and cannot be achieved at the scale and speed needed using the status quo approach.
That is why IFC is providing advisory support to the Government of South Africa to help identify and operationalize private sector participation models in transmission, something that is already happening successfully in Latin America and India, for example.
Specifically, the IFC is sharing its regional and global experience with South Africa, as well as supporting a regulatory framework for private participation, to allow the government to implement the first independent power transmission projects and document lessons learned to support a larger program rollout.
Aside from that, we have collaborated with the South African government to establish an Energy One Stop Shop, which will serve as a single point of contact for energy projects and speed up approval processes.
President Ramaphosa has hailed the new electricity bill as one that will “lead to long-term energy security, a more competitive energy system, more rapid uptake of renewable energy sources, and ultimately lower energy prices for all South Africans.” IFC is committed to assisting South Africa in achieving its energy objectives. We are collaborating with the World Bank Group to help create an enabling environment that will allow for the massive investments required to ensure the country’s energy security.
