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Why limit municipalities in generating power, asks SA Development Bank CEO

Apr 05 2019 14:30
Carin Smith

Patrick Dlamini, CEO of the Development Bank of SA, has questioned why municipalities and metros in South Africa are being limited in generating their own power. 

Dlamini was speaking during a panel discussion on financing sustainable infrastructure at the 4th annual meeting of the New Development Bank - also known as the BRICS Bank - in Cape Town on Tuesday.

The government has said it is interested in getting municipalities and metros to source electrical power directly. 

'Eskom is in a bind'

Last week, Minister of Energy Jeff Radebe said that municipalities should should be encouraged to get their or non-functioning power stations working again. 

"[The stations]… represent an opportunity for municipalities to increase revenues at the same time as improving the country’s electricity system reserve margin," said Radebe at the DLO Africa Power Roundtable on Tuesday in Johannesburg. 

"Eskom is in a bind. How will it finance its debt? It is a creature of legislation. While Eskom is in a bind, how will our economy grow?" asked Dlamini.

"We must come up with smart regulation to enable optimum leveraging for private-public partnerships."

Infrastructure 'inherently political'

He said it is also very important to include marginalised societies when looking for solutions to local infrastructure challenges.

"Infrastructure is inherently a political choice. It is about quality and access. That will determine the cost involved and the efficiency. You can save 50% of your cost, for example, if you are prepared to look after your asset," he said.

"The sustainability of an institution is very important. This must be balanced with the developmental aspect one should strive for. Our ability of taking on risk is a function of the support we have. The more support we have, the more risk we can afford to take."

Accountability

Vassi Naidoo, chair of the Nedbank Group, was part of the panel discussion. He said the recent Eskom load shedding once again illustrated the importance of infrastructure.

"I won't use the word 'corruption', but we have to hold ourselves accountable to deliver infrastructure projects in a cost-effective manner that avoids wasted costs, said Naidoo.

"Accountability also has to be an improvement for society, otherwise infrastructure will not be protected by the people, but destroyed. So, it goes beyond just putting in the roads etc."

In his view, it is important for commercial banks to work with development banks, including the NDB, as well as with communities, to make sure there is local input into infrastructure projects.

Nedbank has financed a number of large cross-border projects and, according to Naidoo, a key element to find infrastructure solutions is for governments to create enabling legislation to allow these kinds of projects in SA and the rest of Africa to be developed in a sustainable way.

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