Budget 2016 suggests that energy isn't high on South Africa's agendaSouth African Finance Minister Pravin Gordhan delivered on Wednesday what many considered the most-important budget speech of President Jacob Zuma's administration. © gui junpeng – 123RF.com In setting out the profile of the country’s economy, Gordhan said: The Treasury currently expects growth in the South African economy to be just 0.9% this year, after 1.3% in 2015. This reflects both depressed global conditions and the impact of the drought. It also reflects policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints and regulatory barriers to investment. Compared to last yearThe first sense from this year’s budget is that little is proposed or even discussed relating to energy compared to last year. A preliminary content analysis of the speech shows that energy buzzwords were not a priority this time around:
Does this mean that energy is not important anymore? Or is it the case that, for South Africa, energy is an issue that has been solved? To the contrary, Gordhan said that Energy Minister Tina Joemat-Pettersson is overseeing the renewable energy, coal and gas Independent Power Producers Program. This program receives exceptional comments for its success. The decision to include coal and gas in the program was first announced in the 2015 budget speech. Those results are discussed in the estimates of the 2016 National Expenditure report:
But the big news is that Gordhan expressed the Treasury’s view and desire to manage the 9600MW nuclear energy new build program. This came after Zuma’s reassurance at the State of the Nation 2016 that the nuclear option is going to be pursued only upon careful consideration of its affordability and careful planning. Gordhan explained that Joemat-Pettersson has the Treasury’s full support to investigate the inclusion of the nuclear program in the country’s independent power plans. Additional funding of R200m in the nuclear energy program has been made available in 2016-17 for transactional advisors and consulting services. This announcement is a relative reassurance to investors in South Africa’s nuclear future. It has been negatively portrayed in doubtful deals and corrupted stakeholders. But this is actually an indication of the government’s plan to invest into furthering co-operation between the private and public sector in the energy market. Gordhan mentioned this by saying that energy, transport, telecommunications and urban development are all opportunities for joint public and private investment and facilities management. Energy analysts were left disappointed by the lack of discussion of the carbon tax. 2015’s speech claimed that the tax would be introduced in 2016 as an important intervention tool to improve energy efficiency. But on the topic of tax-interventions, last year a temporary increase in the electricity levy of 2c/kWh was proposed. The explanation was that the additional charge would be withdrawn when the electricity shortage would be over. Gordhan mentioned nothing about either of the these. From an energy point of view, Gordhan did not impress. The lack of information and specific planning, as well as vague proposed ways forward with regard to nuclear energy, characterised the speech. The general feeling, in comparison to the 2015 speech, is that energy may have lost its priority place in the government’s agenda. Only time will tell if that was an indication of a perceived stability in the sector or that other issues are more pressing this year for South Africa. About the authorRoula Inglesi-Lotz, Associate Professor of Economics, University of Pretoria. |