Enormous progress has been achieved in decreasing global poverty, in the last few years, as the number of persons living in extreme poverty has halved. Despite this feat, most people living in developing economies remain in abject poverty. This is attributed to the fact that in many of these countries, rising prosperity has been accompanied by social exclusion and rising inequality. It is thus pertinent that for household poverty to be eradicated, resources must be distributed fairly across individuals.
According to the World Bank, Africa (particularly Sub-Saharan Africa), constitutes the region with the highest prevalence of extreme poverty. Expectedly, this coincides with Africa’s low electrification rate. In Africa, energy security remains a daunting challenge, mirroring the strong correlation between household and energy poverty. In 2015, the installed generation capacity in Africa (168 GW), was lower than that of a single country in Europe – Germany (204 GW). Inclusive economic growth is the most effective way of fostering shared prosperity. Yet most economic activity is implausible without available, reliable and competitively priced energy. This implies that – energy – a critical tool for economic growth, is inaccessible to the poor, and will likely remain so.
To put it simply that a nation is “wealthy”, doesn’t always reveal the big picture, as evident in the economic and energy land scape of the Republic of South Africa (RSA). The rainbow nation (RSA) has a very unequal economic distribution measured by the Gini coefficient, and this is directly reflected in its energy distribution. Energy poverty is measured by two dimensions: availability (access) and percentage of income spent to use it (affordability). The RSA’s poor households scores poorly in both dimensions. According to the World Bank, urban electricity access in RSA is 93%, compared to about 67% access in the rural areas. Likewise, poorer households spend a higher fraction of their income on energy, compared to their wealthier counterparts. By global standards, the percentage of income spent on energy, after which a household is termed poor, is pegged at 10%. Unfortunately, according to the Department of Energy, the poorest in RSA spends more than 25% of their income on energy.
It goes without saying that the RSA (and many other African) governments have explored several initiatives to address the root cause of energy security. Energy infrastructure investment flows in Africa (particularly RSA), for instance is encouraging. Through a relatively successful Renewable Energy Independent Power Producer Procurement Program (REIPPPP) in RSA, the number of utility scale private sector projects has spiralled in the past few years, with over US$20 billion injected into the sector. This program has been designed to stir the local economy, by creating new jobs and bolstering the local industry. Within this period however, the economic situation of the rural communities seems to only have relatively plateaued.
Moreover, with the state’s energy utility behemoth – Eskom – drowning in huge debts on the back of increasing bureaucracy, quasi-fiscal deficit and corruption; things might have to get worse before getting any better. With the utility also facing high levels of load shedding, it is safe to say that the energy poor and financially excluded might not enjoy a better life any soon. RSA must carry-out a self-evaluation process, to learn from the events of previous policies. RSA must inevitably review the effectiveness and level of implementation of its current policies. First and most importantly, Eskom must be reformed immediately, but cautiously and strategically. This will reduce the prevailing high quasi-fiscal deficit of the utility and make the overall value chain financially viable. Reforms will also drive competition in the sector and make tariffs even more affordable to citizens, since for instance, energy will predominantly be consumed near where it is produced.
Legacy coal power plants should be phased out in favour of competitive, clean and decentralized energy sources like (renewable energy and gas power plants). There is currently an opposition to renewable energy by certain parties with vested interests (e.g. from the minerals industry). This is however a misconception, since renewable energy penetration will create net positive job opportunities. Mining will also still play a crucial role in RSA’s green economy, since it’s still paramount in the development of materials for clean energy sources, e.g. batteries and fuel cells etc.
The failing energy sector also coincides with the period where national funding for energy related research in tertiary institutions is diminishing. The place of human capital for energy development and management cannot be over-emphasized. The SA government must therefore refocus its efforts on funding energy research and development. This will ensure that the next generation of RSA engineers have the knowledge and are well-equipped with “energy future” structures and systems.
Government intervention for the poor, through free small-scale solar power installations should also be explored, as it has the potential to dramatically accelerate energy access. Admittedly, many poor SA households already benefit from 50kWh of free electricity monthly, through the free basic electricity (FBE) policy. More generous and aggressive cross-subsidization mechanism should however be implemented in favour of the poor. This will enable the poorest of poor to have access to energy, hence delivering them from economic oppression through business and job opportunities. Energy availability and affordability in these impoverished areas, will also lead to improved education and health services.
There is no panacea for RSA’s energy sector, however, for her to ensure inclusive economic growth for her citizens, she must take intentional steps that will drive energy security for all. This process wouldn’t be easy, her plans and policies must therefore be persistent, enduring and inclusive. It must be rolled out immediately, void of government bureaucracy and bottlenecks, and implemented effectively.