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South Africa tops World Bank table for infrastructure investment

Out-Law News | 21 Dec 2015 | 3:00 pm | 1 min. read

South Africa was the top market for private participation in infrastructure (PPI) investment in the first half (H1) of 2015, according to data compiled by the World Bank.

Total PPI investment in South Africa of $4 billion during H1 was “boosted” by the country’s renewable energy programme, according to the bank’s updated PPI database (12-page / 800 KB PDF) published on 15 December.

Sixteen renewable energy deals reached financial closure in South Africa in H1, “each benefitting from a long-term off take agreement with state-owned utility Eskom”, the bank said. “Of these 16 projects, eight were solar, seven were wind and one was biomass”.

The projects marked “a dramatic turnaround from zero PPI projects in H1 2014... largely because of the Department of Energy’s decision to stagger future procurement rounds to give Eskom time to connect projects to the national grid”, the bank said.

The value of South African investments were well ahead of those in the other countries comprising the PPI database’s H1 ‘top five’ – Colombia, Chile, Mexico and Brazil, the bank said. The five countries attracted a combined $11.9bn, which “represented 47% of global commitments in the developing world” in H1, the bank said.

The bank’s practice manager for public-private partnerships Clive Harris said: “Solar alone comprised over one-third of all energy investment, while coal made up only 6%. Also, despite the headline drop in investment commitments, activity in countries outside of Brazil, China, and India remain at levels similar to recent years.”

PPI investment in the sub-Saharan Africa region as a whole ($4.1bn) was dominated by South Africa’s performance, the bank said.

The only non-South African project was Senegal’s 54-megawatt Cap des Biches heavy fuel oil-fired combined-cycle thermal power generation facility. The bank said the $134 million build-own-operate greenfield deal was sponsored by ContourGlobal, which signed a 20-year power purchase agreement with the Senegalese national utility Senelec (Societe Nationale d’Electricite du Senegal).

According to an independent study, renewable energy from South Africa’s first wind and solar plants generated more than ZAR 4 billion ($266m) for the country during the first six months of 2015 than they cost.

Last month, South Africa’s National Treasury published a draft carbon dioxide tax bill (4-page / 192 KB PDF) to “encourage investments in and the uptake of more energy efficient and low carbon technologies” and support the reduction of greenhouse gas emissions.

Ministers said the draft bill would also help the country’s growing renewable energy sector “compete on a more level playing field in comparison to fossil fuels”. Proposed measures included an initial “marginal carbon tax rate" of ZAR 120 ($8) per tonne CO2-emission.

A “basic 60% tax-free threshold” was also proposed during the year of implementation up to 2020, together with an additional 10% tax-free allowance for industrial process emissions and a further tax-free allowance for trade-exposed industries of up to 10%.