Rural electrification in South Africa was not easy and did not provide a great financial resource, but did bring benefits to rural communities and was a good example of how public–private partnerships could lead to sustainable projects, KwaZulu Energy Services (KES) CEO Vicky Basson asserted on Wednesday.

KES, which was 65%-owned by European energy company Électricité de France (EDF) and 35%-owned by international oil and gas company Total, was facilitating the access to electricity for rural inhabitants in developing countries.

It was currently involved with two rural electrification projects in South Africa, one in central KwaZulu-Natal (KZN), where it had installed about 10 000 solar home systems (SHSs) and the other in the Eastern Cape, where about 30 000 houses would benefit from SHS installation.

Initially, KES planned to install about 50 000 SHSs in KZN, but progress has been hampered by institutional delays, said Basson during a French South African Chamber of Commerce and Industry event.

It was partnering with the Department of Minerals and Energy (DME) on the project, with shareholders providing a R3 500 subsidy for each installation.

The project was further funded on a fee-for-service model, with households leasing the equipment, which included a solar panel and a prepaid meter, from KES, and, in turn, being provided with a specific amount of electricity to be used during that period.

KES, in turn, provided maintenance of the equipment, as well as replacement of equipment that was no longer working, over a 20-year lease period.

A one-off R110 connection fee was paid by households, after which they would pay R69 a month for electricity. The amount of electricity was loaded onto a token, which was then placed in the prepaid meter.

Households could run four energy-efficient lights, three inside and one outside, a black-and-white television and a radio or a cellphone charger for four hours a day with the electricity provided.

Basson noted that KES was currently awaiting the finalisation of contracts for a third phase of the project.

Meanwhile, the company was just starting with a similar project in the Eastern Cape, with a German investment bank KFW, which was providing a €16-million subsidy for the supply of equipment for the project.

The other shareholders in the project were providing about €4-million in funding for equipment and about another €4-million for project development and other associated costs, such as training, said Basson.

The system used in the Eastern Cape was basically the same as that in KZN, except that the systems were larger, owing to the fact that the region has more cloudy days than KZN.

Further, it would also use a pin code rather than a token, with KES planning to eventually be able to send pin codes by cellphone when payments were received.

KES had the equipment for the first 1 000 systems on hand, but was awaiting the appointment of a monitoring consultant by KFW before it could continue. It was in discussion with the DME and KFW in this regard.

BENEFITS AND CHALLENGES

Basson highlighted that there were many benefits to the installation of SHSs in rural areas, the most important of which was that it replaced more expensive energy sources.

She stated that it would be far more costly for Eskom to supply these communities, which were based in very far outlying regions of the country, through transmission lines, as the usage of electricity by these communities would never allow for a return on the utility’s investment.

It provided a safer form of lighting than candles and paraffin, which often caused fires in informal settlements.

It would save the households time and would allow them to access television and radio for leisure and educational purposes.

Further, the projects had also led to the creation of 51 jobs for locals who had never been employed before. The locals were also given in-house training.

KES also employed small- to medium-sized black economic-empowerment (BEE) companies as subcontractors on its installations.

However, there were also a number of challenges facing KES.

Basson explained that institutional delays in the awarding of contracts to KES by the State led to additional financial costs for the company.

Further, the provision of free basic electricity by the State was also not always uniform, meaning that some households in a community could pay more for their electricity than others in the same community, with the only difference being the day the installation was done.

Households could also not afford larger systems without an increase being made in the subsidies provided, despite their electricity requirements increasing.

Crime was another challenge, specifically for the company, with a number of armed robberies already having taken place at its energy stores, where the electricity was loaded onto the tokens.

This has also forced it to limit the amount of cash it received at the energy stores, with the majority of customers having to pay the money into KES’s bank account at a Post Office branch and take a slip to the energy stores before electricity could be loaded.

Meanwhile, Basson noted that it eventually wanted to involve a local BEE partner that would take over the management of the projects once the projects had reached a point of financial and operational viability.