March 5, 2024

Five energy takeaways from Minister Godongwana’s budget speech

On the 21st of February 2024, Finance Minister Enoch Godongwana delivered the annual Division of Revenue Bill (Budget Speech) to Members of the National Assembly. Several of the interventions in the Minister’s speech centered around the energy sector, with the Minister outlining increased efforts to resolving loadshedding and ensuring a sustainable energy sector.

The Energy Council notes the following five key energy takeaways from the Budget Speech:

1. To end loadshedding, we must fix Eskom and increase private power generation.

“Through the combination of private investment in new energy projects, rooftop solar installations and improvements in Eskom’s generation fleet that load shedding will reduce, and reliability and security of supply improve.”

The Energy Council supports the Minister’s comments and commitment to the key pillars of the Presidential Energy Action Plan (EAP). The National Energy Crisis Committee (NECOM) established under the Presidency is tasked with the implementation of the EAP. Business participation in NECOM is coordinated by the Energy Council with support from Business Unity SA.

Higher levels of resources are needed to deliver the maintenance recovery work being done at Power Stations.

2. Continuous implementation of structural reforms necessary for a sustainable electricity sector.

“Reforming the [electricity] sector will result in long term energy security. We took the necessary

decisions in the past five years, and these are bearing fruit.”

The Energy Council supports government’s commitment to pursuing critical reforms in the electricity sector. In the near-term, a critical action is the passing of the Electricity Regulation Amendment Bill (ERA). The Energy Council firmly supports the ERA as transformative legislation that will propel South Africa towards a competitive electricity market while safeguarding and expanding the national grid under an independent National Transmission Company.

ERA must be assented in the 6th sitting of parliament and before the 2024 elections.

3. Address complex challenges facing Municipalities in the electricity sector.

“We are introducing a new R2 billion conditional grant over the medium term to fund the rollout of

smart prepaid meters. This will begin with municipalities that have been approved for debt relief.”

As such, the rollout of smart meter devices allows municipalities to better meet the debt conditions –authorities can power on and off remotely, detect tampering, limit the load that can be drawn from the meter, and register electricity exported from the property.

The Energy Council supports this initiative as a dual mechanism to improve municipal debt through better recoveries as well as modernise the municipal demand interface through smart metering.

4. The independent assessment of Eskom’s coal plants will be released.

“We will release the report on the independent review of Eskom’s coal-fired power stations in the coming week. The review was done to inform part of the conditions attached to the debt relief plan. The recommendations will feed into Eskom’s corporate plans to bolster accountability and oversight.”

In 2023, Eskom was obliged to seek an independent assessment of the state of its coal-fired power station as a condition of Treasury providing R254-billion in debt relief – an assessment duly undertaken by the German VGBe consortium

The Energy Council welcomes the public release of the document and supports transparency of all information related to Eskom performance.

5. Deploying funding to the shift to New Energy Vehicle manufacturing

“The National Treasury plays a crucial role in mobilising resources, designing incentives, and influencing policy to mainstream climate change… The government has raised US$3.3 billion so far from Multilateral Development Banks and International Finance Institutions to support climate change, energy, and just transition objectives.”

The Energy Council welcomes government deploying funding toward the energy transition. As a key first step, Minister Godongwana mentioned an investment allowance for electric vehicle manufacturing will be introduced beginning 1 March 2026. This will allow manufacturers to claim 150% of investment on electric and hydrogen-powered vehicles.

The above must be placed in the context of the Just Energy Transition Partnership whereby the international community committed an initial $8.5bn at COP26 in 2021 to facilitate South Africa’s accelerated Nationally Determined Contributions under the UNFCCC’s Paris Agreement. The use of this financing must fall within the South African Government’s Just Energy Transition Investment Plan, published at COP27 and available here.

The Energy Council unequivocally supports South Africa’s international climate obligations, alongside our country’s domestic climate legislation aimed at reaching Net Zero by 2050, and further recognises the critical importance of a successful national energy transition in meeting those decarbonisation targets whilst maintaining energy security.

Muhammed Lokhat, Associate: Project Delivery & Strategy, Energy Council

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