Standard Bank is prepared to help solve the government’s R210 billion grid expansion dilemma — but policy uncertainty could delay this. (Waldo Swiegers/Getty Images)
Standard Bank is prepared to help solve the government’s R210 billion grid expansion dilemma — but policy uncertainty could delay this.
Speaking to the media on Tuesday, Standard Bank South Africa chief executive Lungisa Fuzile noted that, as soon as there is adequate certainty around the regulatory framework which will guide the expansion’s financing, the bank will play its role.
South Africa’s biggest bank is also one of the largest funders of renewable energy in the country. However, Eskom’s outdated transmission infrastructure will hamstring efforts to bring additional renewable capacity online, delaying the solution to the country’s load-shedding crisis.
The country’s inadequate grid has become a thorn in the side of Electricity Minister Kgosientsho Ramokgopa, who has time and again underlined the importance of mobilising investment for the grid.
Eskom needs R210 billion to upgrade its grid, the minister has said. It is not yet clear how the utility plans to raise this amount — and to what extent it will lean on the private sector.
Fuzile said on Tuesday: “To the extent that government can change its approach and policy framework to create space for private sector participation in grid expansion, we will be involved.”
It is difficult, he said, to imagine the banking sector’s involvement in such an intervention without Standard Bank. “We never stand on the sidelines,” he said.
“That’s why we get involved. We engage with government, with players in the private sector, to seek ways to make sure that what is set out in law and policy frameworks enables the private sector to contribute meaningfully to solving the problem … When the opportunities are there, we stand ready to participate.”
Zaid Moola, head of Standard Bank’s corporate and investment banking division in South Africa, called the predicament a “chicken and egg situation”.
“There is almost a capacity constraint on the grid … that is also restricting the number of renewable energy projects that can be undertaken,” he said.
“And so, to the extent that there is an opportunity for us to assist in the advancement of the grid, we know indirectly that it will also create further opportunity for renewable energy to be coming through — which is exactly aligned to, from a purpose perspective as a bank, what we are trying to achieve.”
Moola noted that, while the bank has yet to contribute financially to the expansion effort, it is closely involved in discussions around the regulatory framework through its involvement in the National Energy Crisis Committee. “We definitely have a seat at the table and we are definitely trying to influence that,” he added.
“I think there is definitely stuff that is being done on transmission and soon we should see more coming out around that. But these are complex things, to be fair. And they need the right attention. I guess the private sector definitely has a role to play in that and will definitely do so.”
The recent licensing of the National Transmission Company of South Africa, a major milestone in Eskom’s unbundling, brings the country a step closer towards realising the government’s aspirations for the beleaguered power utility, which will have a bearing on how its infrastructure will be financed.
But questions remain about the guise the transmission company will take — what its ownership structure will look like and how it will generate sufficient revenue to make a profit. Eskom reportedly expects the transmission company to begin trading by April 2024.
Since President Cyril Ramaphosa’s announcement in 2018 that Eskom would be unbundled, critics have warned that the process would lead to privatisation, resulting in higher electricity prices for consumers as investors endeavour to maximise profits.
There are also concerns about the effects of financing, also at the expense of public interests, with renewable energy emerging as an asset class private investors are scrambling to get in on.
During Tuesday’s media briefing, Fuzile and his team underlined Standard Bank’s commitment to renewable energy initiatives. The bank has provided R30 billion in financing for new renewable energy power plants, according to their presentation.
Standard Bank says its corporate and investment banking division is on track to exceed its renewable investment targets. This after the bank surpassed its R40 billion 2022 goal by executing 29 sustainable finance transactions with a total value of R55 billion
It has funded projects under the Renewable Independent Power Producer Programme, as well as the Risk Mitigation Independent Power Producer Procurement Programme, to the tune of R52.5 billion.