South Africa’s plan to modernize its electricity grid, essential for the transition from coal to renewable energy, is facing serious financial difficulties. The government needs US$21 billion to expand the country’s electricity infrastructure, but is struggling to find investors willing to finance the project. The situation is further complicated by the precarious financial situation of Eskom, the state-owned energy company that has a monopoly on the sector.
Since the May elections, which brought a collision government to power, there has been a political shift towards renewable energies. However, years of bureaucratic delays and conflicting messages about the transition from coal have hampered progress. Now, while private companies like Mainstream Renewable, EDF Renewables and Acciona SA are poised to boost the sector, South Africa faces the challenge of connecting energy generated in sunny, windy regions to the urban centers that need it most.
International donors have offered US$11.6 billion, mainly in the form of loans earmarked for climate projects. However, these funds will not be made available to Eskom without sovereign guarantees, something the South African government cannot currently provide due to the company’s high level of indebtedness. Eskom owes more than 400 billion rand (US$ 21 billion) and faces an additional problem: bankrupt municipalities owe the company around 78 billion rand (US$ 4.2 billion), which represents an “existential threat”, according to the new Minister of Energy, Kgosientso Ramokgopa.
The expansion of the South African electricity grid, which would include the construction of around 14,000 kilometers of lines and poles, is crucial to the success of the energy transition. However, negotiations to find a financing solution have so far made no progress.
