South Africa needs competition and private investment in electricity generation, transmission and distribution to ensure the continuity of affordable supply, Free Market Foundation executive director Leon Louw said on Thursday.

South Africa needed an independently owned and operated transmission grid, independent power producers (IPPs) and market trade in electricity.

He said at a media briefing in Johannesburg that the government’s New Growth Path would not be possible under the current electricity status quo. “We are losing a potential 3.3% to 3.5% gross domestic product as a result.”

South Africa’s Independent Power Producers Association (SAIPPA) MD Doug Kuni said South Africa was facing an electricity crisis, which if left unresolved, would cost the economy billions of rands, government in growing the economy and creating jobs.

“Electricity is now being taken out of the productive sector in this country, and taken out of the economy. The smelters are being shut down, or encouraged to shut down,” he said.

Kuni also noted that economic drivers such as mines, manufacturers and property developers had to rein in potential developments and expansion as a result of the energy crisis.

Citing the National Treasury and the Department of Trade and Industry, he said that for every unserved kilowatt hour (kWh), the country was losing R75/kWh. “We are short of 5 000 MW of energy in the country at the moment, and this amount, not served as energy and its value to the economy, equates to R3.3-trillion a year. This is an astronomical figure,” he noted.

Kuni said electricity policy, legislation and regulations had to work in concert to achieve desired outcomes, which included the immediate generation of electricity. He lamented that, where legal interpretations offered different applications, the outcome was confusion and uncertainty, which discouraged IPPs from investing in additional power capacity.

He stated that the amended Electricity Regulation Act did not encourage companies to be independent power producers in South Africa, while the Independent System and Market Operator bill did not deliver an independent systems management operator.

“The white paper policy document of 1998 and the electricity master plan of 2007 explicitly state that competition is a policy in the country, and so is customer choice of electricity. The amended act now excludes a willing buyer/seller and it does it surreptitiously, while wheeling is not even mentioned. The licensing requirements from private or own-use power generation are now subject to Ministerial approval and there are no prescripts for how Ministerial approval is actually made.”