Aug 03, 2012
National interests are barriers to regional energy integrationBack
Africa|Export|Health|PROJECT|Projects|Resources|Road|SECURITY|Sustainable|Africa|Angola|Mozambique|South Africa|United States|Energy|Energy Integration|Energy Security|Energy Solutions|Gas Contracts|Maintenance|Solutions|Trans-national Infrastructure|Transnational Infrastructure|Infrastructure|Sub-Saharan Africa
© Reuse this
Concentrations of economic growth in different centres in various countries in the region will slowly lead to stronger regional ties, where isolated activity becomes increasingly connected because of expansion and the desire to trade goods and skills between different countries.
The momentum of growth will force the consensus that road, rail or other types of infrastructure will have to be built. But, as usual, somebody has to put up the money upfront.
In our region, those with the money are increasingly becoming a mix of national governments (some of whom are reaping the benefits of commodity booms), foreign States (and their national companies), multilateral agencies, private firms and domestic or international investors who can foot some of this bill.
But there could be distortions: infrastructure linked to facilitate resource extraction and the transportation of goods may gain preference over pure public-good type of infrastructure that is of value to the general populace rather than a limited ‘audience’ of economic agents.
Angola and Mozambique may demonstrate an incessant surge in gross domestic product (GDP) figures but such windfalls may not translate into apportioning investments into general public goods but concentration around expanded resource exploitation.
The proceeds to national coffers is a function of how well resource rent deals are structured (now becoming an issue of concern for Mozambicans, who feel gas contracts are not the optimal resource rent deals and want them revisited).
But, more importantly, good governance ensures proceeds go to the right things and the right people – misappropriation of windfalls is always a danger.
The state of national coffers and the spread of wealth among the populace are the great enabling factors for bold leaps into large domestic and transnational infrastructure. It breeds confidence among both internal and international players looking to support or further new markets.
The Southern African region, though, is a mix of rich and poor countries. Not all the national coffers nor personal incomes of its citizens can afford the infrastructure development of plant and transmission and distribution lines. Countries with a bigger balance sheet, strong sustainable growth trends and the capacity to carry the bulk of the cost burden can help tackle some of the infrastructure backlog. They can carry the risk because growth in their own countries will generate sufficient resources to sustain the long-term financing and maintenance costs of transnational infrastructure. A poor country sits with the resource but lacks bankability and offtake agreements of sufficient scale to sustain the bulkiness necessary to make options economically viable.
In the region, big economies and international assistance through multilateral and even export and import banks are necessary. Energy integration is but one aspect of the economic integration puzzle. Energy solutions offer two complementary drivers of integration: investment flows act as stimuli of local and national economies, and energy security itself facilitates investment in plants and extractive industries, and allows small and large entrepreneurs to engage productively and efficiently in trade and commerce.
Theoretically, all South Africa’s, as well as sub-Saharan Africa’s, electricity supply, as a case in point, can be met by the unlocking of large- and small-scale hydro projects in the region. There is also gas, biomass and non- hydro renewables like wind and solar – a comprehensive low-carbon solution stares us right in the face but it will not be realisable because of political and other barriers.
National preference can slow transnational projects because every country has its own domestic development challenges.
In any case, special interest groups within a national political economy would put pressure on government for spend to be localised if they see themselves as key beneficiaries of such spending.
Energy, too, is notoriously a subject of security concerns. High dependence on politically vulnerable and unstable countries not only heightens project risk but also creates anxieties about whether a secure line for the transmission or transportation of energy can be provided by the source country.
The buying country itself may have to bear the costs of extra security – through the private sector or its own military, as the US does to secure sea routes for the transportation of oil. In the final analysis, while regional energy sources offer great promise to lower dependence on costly domestic options, these will not be realisable without long-term economic sustainability and diversification by different regional member States.
Booms that are distorted by optimum and selective commodity export performance do not speak to the general economic health but specifics. This is the pincer grip of uncertainty that holds the entire development of transnational infrastructure in the region at ransom.
The bigger economies have their own domestic political economy and vested interests that tug investment allocations towards the domestic agenda as they have no readiness yet to be that generous nor so blindly egalitarian against their own priorities and constituencies.
Therefore, the flush of investments will be centred within the domestic economy and the outflow towards other regional States will be measured in terms of the net returns and benefits to the national economy and private players concentrating capital accumulation within their own home base. Transnational projects are always vulnerable to domestic pressures, even though larger economies can play an anchor ‘tenant’ role – politics always mires good economic common sense.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Deputy Editor
Other Saliem Fakir News
Unconventional reserves, unlike cheap conventional sources, remain vulnerable to market conditions, technology and geological characteristics. Transplanting from one country condition to another will always remain a challenge, given the different conditions that...
Updated 55 minutes ago JSE-listed Dipula Income Fund reported that its distributable earnings grew 33.2% in the six months ended February 28, translating into a combined growth of 6.8% in distributions for both A- and B-linked units. The distribution attributable to the A-linked units was...
Updated 1 hour 2 minutes ago JSE-listed Growthpoint Properties’ Kirstenhof Office Park, in Johannesburg, has become the hundredth building in South Africa to achieve a Green Star SA certification from the Green Building Council of South Africa (GBCSA), securing a 5-Star Green Star: Existing...
Updated 1 hour 17 minutes ago JSE-listed residential property developer Calgro M3 Holdings’ subsidiary, Calgro M3 Memorial Parks has diversified its portfolio by officially launching its first memorial park, in Nasrec, near Soweto. This is the first development of its kind by Calgro M3 in what it...
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
This Week's Magazine
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...