Photo: Salam Habash / Unsplash
The Southern African Power Pool (SAPP) has launched a new$1.3 billion (about R24.8 billion) regional finance facility that will pool public and private capital to support electricity grid infrastructure developments and improve cross-border energy transmission.
The facility was launched on the sidelines of the Africa Energy Indaba on Tuesday and will
prioritise projects that focus on connecting currently unconnected SAPP members, help relieve congestion bottlenecks to regional electricity trading and promote intercontinental power trading through transmission corridors, among other targets.
The SAPP is a cooperation of 12 Southern African countries represented by their national power utilities and some private utilities under the auspices of the Southern African Development Community. Members Angola, Botswana, Democratic Republic of the Congo, eSwatini, Lesotho, Mozambique, Malawi, Namibia, South Africa, Tanzania, Zambia and Zimbabwe have created a common power grid between their countries.
Access to capital is the number one barrier facing developers of energy transmission infrastructure, Southern African Power Pool chairperson Victor Mapani said.
“The regional transmission infrastructure finance facility dismantles this by enabling the private sector to work alongside public sector utilities to roll out new transmission lines at scale,” he said, adding that the facility was aiming to connect Angola, Malawi and Tanzania to the platform and had identified eight priority transmission projects.
The launch comes as Africa experiences an energy shortage, despite an abundance of energy sources.
“[The regional facility] dismantles this by enabling the private sector to work alongside public sector utilities to roll out new transmission lines at scale,” Mapani said.
The Climate Fund Managers (CFM) has been appointed to manage the facility.
Speaking at Tuesday’s launch, Amit Moham, the CFM head of private credit, said there was an urgent need to mobilise blended finance “at scale and speed to enable the rollout of additional grid infrastructure in the Southern African regions where about 180 million people are exposed to ongoing power disruptions”.
“The lack of investment in grid infrastructure is one of the reasons for ongoing blackouts in many parts of Southern Africa,” Mohan said.
The facility will comprise a $100 million target development fund to provide concessional capital and development expertise including support on viability studies, legal and financial structuring, planning and environmental, social and governance compliance and a $1.2 billion target construction fund that will make direct investments through the provision of construction finance and value-add expertise for project builds.
The facility launches with$20 million in commitments from the SAPP members and will have a fund life of up to 20 to 25 years.
“If we don’t invest in grids today, we will face gridlock tomorrow. This is even more pressing from an energy transition perspective as the world needs to embrace green electrons on the grid,” Mohan said.
South Africa’s power utility Eskom, which requires about R400 billion over the next decade to upgrade its transmission network and rid itself of the need for load-shedding, has been calling for investors to help it expand its energy grid.
To address its energy crisis, South Africa is looking to import from neighbouring countries such as Botswana and Zambia through the Southern Africa Power Pool arrangement.