South Africa: Weaning Itself Off Coal
Following a few years of sluggish growth, in August 2016, South Africa pulled ahead of Nigeria, which has a population three times as large, to again become the largest economy in Africa, according to the International Monetary Fund (IMF). The country has a solid list of achievements: its demographic growth is now under control, its school attendance rate is the highest in Sub‑Saharan Africa, it attracts the most foreign investment on the continent and, according to statistics, 85% of its population has access to electricity.
South Africa has a huge energy appetite. It accounts for nearly 30% of the continent’s total energy consumption but only 4.6% (55.4 million people) of its population2. It has the biggest vehicle fleet on the continent: 180 vehicles per 1,000 inhabitants – North Africa only recently passed the 100 mark – compared to an average of 44 for the continent as a whole3. In addition, final oil product consumption rose by 20% from 2004 to 2014.
An Aging Grid and the Dominance of Coal
South Africa has two weaknesses, however:
- Due to a lack of adequate investment, the country’s electrical grid is in bad shape (one third of power stations are routinely idled), and networks continuously operate near full capacity. In the face of rapidly growing demand, the state power utility Eskom must frequently resort to load shedding. Not only does this pose problems to the population, especially in the poorest areas, it seriously hampers industrial activity, costing the economy one percentage point of annual growth, according to the government’s own estimates.
- Like China and India, South Africa’s dominant source of energy is coal, which provides 92% of its electricity. South Africa is the world’s seventh-largest coal producer and possesses 95% of Africa’s total coal reserves. It even exports one quarter of its supply, mainly to India. The mining industry is inefficient, however, plagued by repeated strikes and declining competitiveness. In order to increase electricity output, in 2008 Eskom began construction on two gigantic coal-fired power plants, Medupi and Kusile, each with an installed capacityof 4,800 megawatts. But at the end of 2016, the plants were still unfinished and facing significant cost overruns.
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