South Africa: The Changing Face Of Power In Africa (Energy Update)

Last Updated: 6 August 2012
Article by Greg Nott

No longer the dark continent, Africa is shedding light on investors' quest for new sources of energy. Recent oil and gas finds, coupled with renewable energy progress and power project successes, have switched attention from the problems of the past to the promise of the present.

While oil and gas are still being discovered in a few other parts of the world, including the Eastern Mediterranean, Northern Europe and Gulf of Mexico, it is the finds in Africa that are arguably fuelling the most investor excitement.

To quote the chief executive of a European energy giant, as reported in the New York Times of 10 April 2012, "Africa will be the backbone of our production and growth in the next 10 years".

His words have been echoed by other major players in the international energy industry, hailing natural gas finds off the coast of Mozambique and Tanzania as the most signifi cant gas discoveries in a decade.

According to media reports, the fi rst two major finds in Mozambique rival the entire reserves of Kuwait, and expectations are rising that there is much more to come since this part of the world has been virtually untapped.

Adding to the buzz about Africa are new oil finds in Uganda, natural gas fi elds off Namibia, and exploration being undertaken in East African countries such as Kenya and Tanzania, previously overlooked in favour of oil-rich West Africa.

These headline-making events are not the only reason for investors' high hopes for Africa as the new energy frontier. Other developments that are sparking optimism are the continent's recent successes in achieving power project closure, along with regulatory reform in the energy sector and the progress being made in renewable energy.

Power deals signed and sealed

In the past, Africa earned an unfortunate reputation as a continent with a poor track record for achieving closure in infrastructure projects in various sectors, including energy.

A lack of transparent procurement processes, low tariffs and a lack of investment in the power sector all ensured that this vital sector became a perennial underperformer.

There are positive trends emerging however which indicate that change is certainly in the wind. Recently, several major projects have reached closure which seem to indicate that a brisker pace has now been set, suggesting a different momentum to the painfully slow implementation of projects which seemed to be Africa's fate.

Although beset by many years of delays Uganda can pride itself in the development of the Bujagali Hydropower project which came on stream earlier this year.

The Hydropower Project in Uganda is a 250-megawatt power-generating facility built on the Victoria Nile River. This project is surely one of the most rigorously reviewed, carefully planned and painstakingly executed projects in the energy sector in Africa.

Some years ago Bujagali Energy Limited (BEL), was chosen as the preferred bidder in an international competitive bidding process, run by the government of Uganda with support from the World Bank.

Stakeholder management and good governance emphasised

One of the requirements BEL had to meet was the filing of a social and environmental assessment, the aim being to ensure the hydropower project would deliver maximum benefits while complying with strict environmental and other regulatory obligations, both during construction and operation.

Among other things, the project company committed to providing alternative water supplied for villagers whose access to the river would be restricted as a result of the project. It also undertook to plant indigenous vegetation on islands and riverbanks around the Bujagali reservoir, to monitor fish stocks and restock if necessary, to provide alternative facilities for white water rafting enterprises, and to minimise the effect of construction through traffic management and environmental management programmes.

Another important facet of the project has been an extensive public consultation and disclosure programme to increase community awareness and provide opportunities for community involvement.

On its website, BEL notes that because of the severe shortage of electricity in Uganda, electricity consumers regularly experience rotating blackouts of between 12 and 24 hours a day. It also notes that the Bujagali Hydropower project, while going a long way towards alleviating Uganda's energy poverty, will not cause greenhouse gas emissions, in contrast to most electricity generated in Uganda (much of it by diesel and oil generators).

Talking of minimising greenhouse gases, another major power project that is setting the pace for the transformation of the African energy landscape - and investors' perceptions of it - is South Africa's Renewable Energy Independent Power Producers Programme (REIPP).

Renewable energy set to become reality

Through the REIPP, the Department of Energy aims to procure a total of 3 725 Megawatts of energy from renewable sources such as wind, solar, biomass, biogas and landfill gas, among others. The programme consists of five bidding phases or 'windows', the first two of which have already passed (in November 2011 and March 2012 respectively).

The Department has drawn widespread praise for its capable handling of an extremely complex bidding process. So far, the REIPP programme has been immaculately executed, with industry watchers noting the comprehensive bid specifications, inclusive consultation process and disciplined approach to deadlines, as well as the integrity of the process of selecting preferred bidders.

Administrative efficiency has gone hand in hand with high-level political support, and this has not been lost on investors, advisors and other players, who have flocked to take part in the programme.

At the time of writing, details were awaited as to the outcome of the financial close stage for bidders who participated in the first bidding window. This has caused some consternation amongst developers. This milestone is critical as the bidders concerned will be making concrete financial arrangements that will enable them to start construction as soon as they receive the go-ahead from government.

The South African REIPP, a flagship project, hailed universally as a success, is a project which has managed to capture the imagination and excitement of the market as did the development of renewable projects in North Africa, particularly in Morocco.

Political will is paramount

Government should always be the champion in setting the scene for private sector participation and it seems that this is a lesson Africa is taking to heart. As with Uganda's hydropower project, the REIPP in South Africa has enjoyed top-level political support from its inception. If South Africa is to succeed in introducing independent power production - and in so doing blaze trails for other African countries - it will be critical to continue setting the tone from the top.

Up to now, the country's energy sector has been dominated by a state-owned monopoly which, understandably, will be reluctant to lose its grip on the market. Investors, on the other hand, will need the assurance that fair competition will prevail and that new entrants will be protected from potential market abuse. They will also want clarity on how they will be expected to interact with the incumbent.

In this regard, government is not only making the right noises but following up with appropriate action by preparing to establish the Independent System and Market Operator (ISMO). Briefly, ISMO's role will be to procure power from the independent power producers so as to level the playing field and eliminate conflict of interest between the buyer and seller of electricity.

According to the ISMO Bill that the Minister of Energy has issued, ISMO is to be created as a separate juristic person with a nine-member board of directors, whose chairperson will be appointed by the Minister. It appears that ISMO, like Eskom, will be regulated by the National Energy Regulator of South Africa (Nersa).

The Parliamentary Portfolio Committee on Energy has already held two public hearings on the ISMO Bill, which has been well received by a cross-section of energy industry stakeholders, including business, trade unions, academia and interest groups such as the Heavy Energy Users Group.

The latest round of public hearings, held in May 2012, attracted as many as 148 submissions. Some key issues that stakeholders raised in their submissions include the need for independent transmission lines to minimise connection risk, bulk electricity supply and network tariffs, and transparency in the allocation of megawatts between Eskom and independent power producers.

The Department of Energy has said it will consider the proposals submitted about ISMO when developing the policy guidelines and regulations that will pave the way for the creation of ISMO, which will no doubt further enhance the attractiveness of the sector to investors.

Africa-friendly investment

Africa's energy landscape is changing rapidly, in more ways than one. New gas and oil discoveries in countries outside the traditional resources footprint in North and West Africa have fuelled a flurry of activity among energy investors from Europe, China and India. For the most part, Africa is welcoming the intense interest being shown in its power resources, the development of which is critical for the eradication of poverty.

There is widespread understanding that investors not only need to know the rules by which they will be playing but also that these rules will be fairly and transparently applied. Africa is responding by introducing regulatory reforms, such as in South Africa where independent power producers are set to enter the market imminently. The continent is also showing itself capable of managing major power projects efficiently and transparently, sending positive signals to citizens and investors that Africa has the power to deliver on its promise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Werksmans Incorporated
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Werksmans Incorporated
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions