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South Africa signs $4.7b of delayed renewable energy deals

South Africa signed long-delayed renewable-energy contracts worth $4.7 billion with independent power producers on Wednesday, April 4, 2018 in the first major investment deal under President Cyril Ramaphosa.

Cyril Ramaphosa
President Cyril Ramaphosa of South Africa

The signing of power purchase agreements for the 27 mostly solar and wind projects was held up for over two years under ousted president, Jacob Zuma, who favoured a plan to build additional nuclear power plants.

It was also the subject of a last-minute legal challenge by the NUMSA labour union and Transform RSA lobby group, but a court rejected their application for an urgent interdict last week.

The signing represents a victory for Ramaphosa, who has promised to unlock investment and kick-start economic growth since replacing scandal-plagued Zuma in February.

“This will bring much-needed policy and regulatory certainty and maintain South Africa’s position as an energy investment destination of choice,” the energy ministry said in a statement.

Ramaphosa, a wealthy businessman, has prioritised revamping the economy and turning around struggling state-owned enterprises like utility Eskom.

Eskimx will purchase power from independent producers as part of the deals agreed on Wednesday.

Opponents of the renewable contracts argued that Eskom could not afford the additional financial burden and that they would lead to job losses in the coal sector.

South Africa relies on coal-fired plants for more than 80 per cent of its electricity generation, while renewable contribute around 7 per cent.

Transform RSA, which opposed Zuma’s removal as head of state, said it would continue to fight the renewable deals and had appealed last week’s court ruling dismissing its application for an interdict.

“Eskom simply does not have the liquidity, cash flow and strong balance sheet to support this hideous gamble on the fiscus and state electricity supplier,” Transform RSA president, Adil Nchabeleng, said.

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