Renewed focus: Ensuring steady supply, improving efficiency and encouraging growth of alternative sources

Coping with rising demand in the face of years of underinvestment in infrastructure is a key challenge for South Africa’s energy sector. With power outages dominating headlines in 2008, maintaining a stable supply of energy to industry, business and domestic consumers is crucial to the country’s future economic growth. South Africa has also moved beyond simply ensuring energy security to working towards ensuring affordable access to energy sources.

IMPORTANCE OF NEW SOURCES: The country’s energy strategy also focuses on the need to improve efficiency and promote renewable sources.

Coal-fired power stations still provide the vast majority of South Africa’s electricity, and additional plants are being built to augment generation capacity. Independent power producers (IPPs) are being encouraged to enter the market as the country seeks to diversify its energy supply, although the state-run power utility, Eskom, will remain the sole buyer of generated electricity. South Africa is one of the largest coal-producing countries in the world, but reserves are declining: the desire to shift to more sustainable energy sources is fuelling the drive to develop cleaner technologies.

South Africa’s oil deposits are limited, but its refining and downstream oil industry is relatively developed; the country hosts some of the continent’s largest refineries. Upstream, there is excitement about a number of natural gas deposits, including vast reserves of shale gas in the Karoo region. While the government is yet to decide whether to authorise shale exploitation in the Karoo, which relies on the controversial fracking technology, many point to the unrivalled opportunity offered by the deposit.

MEETING DEMAND: South Africa’s energy needs have risen rapidly in recent years, tied to population growth, an expanding economy and industrialisation, with mining a particularly voracious consumer. Demand for electricity has significantly outstripped supply, leading to rolling blackouts in 2008. The government and Eskom have since launched a renovation and extension programme of the country’s power infrastructure, while also seeking to increase the contribution of renewables and nuclear to South Africa’s energy capacity.

According to BP’s “Statistical Review of World Energy 2011”, South Africa’s primary energy consumption grew by 1.7% in 2010, up from 118.8m tonnes of oil equivalent (toe) in 2009 to 120.9m toe. Coal provided 88.7m toe – or 73.4% – of total consumption, while oil was the second-most-important energy source, providing 25.3m tonnes – or 20.9% – of total consumption in 2010. Coal consumption has risen 1.1% from 87.7m toe in 2009 to 88.7m toe in 2010, while oil consumption has also grown, rising 2.7% from 517,000 barrels per day (bpd) in 2009 to 531,000 bpd in 2010, following a 2007 peak of 549,000 bpd. With limited reserves of its own, the country is a major importer of crude and natural gas, although most refining occurs locally.

Coal dominates the energy share for electricity generation, accounting for 90% in 2010, with nuclear and hydro each accounting for 5%. The government’s Integrated Resource Plan (IRP), which provides a 20-year outlook for electricity generation, aims to shift the balance away from coal and towards nuclear and renewables, creating an energy share of 65% coal, 20% nuclear, 9% renewables, and the remainder from hydro and combined-cycle gas turbines.

ON THE RISE: According to Eskom, existing generation capacity in South Africa stands at 43,895 MW, around 95% of which is provided by Eskom. Government projections of energy demand suggest that in a high-maximum scenario, annual demand will reach a total of 45,255 MW by 2015, up 15.4% from 39,216 MW in 2010. A further increase of 27.4% is projected from 2015 to 2020, with demand rising to 57,649 MW, while demand is expected to reach 80,272 MW by 2030 in a high-maximum scenario, representing a 39.2% increase over a 10-year period. In a low-maximum demand scenario annual demand is projected to increase 19.4% from 38,587 MW in 2010 to reach 47,848 MW in 2020, with a further rise of some 13.6% to 55,408 MW in 2030.

Industry is the most demanding sector in terms of consumption. According to 2009 data from the International Energy Agency, industry in South Africa accounted for 21,729 kilotonnes of oil equivalent (ktoe) of total final consumption, or 31.6%, against 17,310 ktoe – or 25.2% – for residential, the next largest sector. Transport followed, accounting for 17,170 ktoe, or 25%, while commercial and public services represented 5546 ktoe – or 8.1% – and agriculture 1535 ktoe, or 2.2%.

GOVERNMENT PLANS: South Africa has in recent years sought to develop a long-term energy strategy to provide a framework for making decisions about policy. The country is also looking at how to ensure demand- and supply-side management, as well as incorporate improved energy efficiency and use of renewables into its plans for the sector.

Soon after the end of apartheid, the South African government – no longer beset by sanctions and international isolation – began to review its energy policy, culminating in its 1998 white paper which prioritised equitable access to energy, as well as improved governance, diversified supply and increased competition in energy markets. A second white paper, on renewable energy, followed in November 2003, setting a target of 10,000 GWh (0.8m toe) contribution to total energy consumption to come from renewables by 2013.

The government adopted its first Integrated Energy Plan (IEP) in March 2003, outlining the country’s energy needs from a holistic perspective and with reference to different types of consumer. In 2010 a sub-plan of the IEP was developed, and then adopted in March 2011; the IRP focuses on the 20-year outlook for electricity in South Africa, identifying the investments necessary to meet projected demand at minimum cost (see analysis). Supplementary policy frameworks include the 2004 Energy Efficiency Strategy, a 2007 plan on liquid fuels and the 2008 Nuclear Energy Policy, while the National Energy Act of 2008 empowers the minister to act where needed to ensure energy security.

The wide array of policy mechanisms and regulatory papers relating to energy – numbering at least seven – has drawn criticism from some quarters, with the importance of a revised integrated plan emphasised by several actors in the sector.

Monitoring and regulation is predominantly undertaken by the autonomous National Energy Regulator of South Africa (NERSA), which was established by the 2004 National Energy Regulation Act, after the cabinet decided a single regulatory body was needed.

A number of state-owned enterprises promote the financing and marketing of various activities in South Africa’s energy industry. Most are subsidiaries of the Central Energy Fund (CEF), including the South African National Energy Institute, National Energy Efficiency Agency, Petroleum Agency of South Africa, Energy Development Cooperation and PetroSA.

OIL & GAS: With its limited hydrocarbons reserves, South Africa remains a significant importer of crude oil and natural gas. Many of the imports are used to make various liquid fuels and other petroleum products. In addition, synthetic liquids are produced from abundant domestic coal resources, a legacy from the apartheid era when the government sought to reduce dependence on crude oil imports.

As of 2009 South Africa imported 66% of its crude oil needs, according to the US Energy Information Administration (EIA). Oil is sourced primarily from Saudi Arabia, Iran, Nigeria and Angola.

Liquid fuels produced using coal-to-liquids or gasto-liquids (GTL) processes largely make up the balance, contributing some 33%, with domestic oil and gas fields contributing negligible volumes. Domestic oil consumption increased by 2.7% in 2010, reaching 531,000 bpd from 517,000 bpd the previous year, following a 2007 peak of 549,000 bpd according to BP’s “Statistical Review of World Energy 2011”. South Africa’s rapidly expanding economy makes the country an important market for hydrocarbons, in terms of industry, transportation and its growing population.

The South African Petroleum Industry Association (SAPIA) groups together the industry’s major players: BP, Chevron, Engen, PetroSA, Sasol Oil, Shell and Total South Africa. The national oil company, PetroSA, owns, operates and manages the country’s petroleum assets as well as the Mossel Bay GTL refinery.

OFFSHORE RESERVES: PetroSA was formed in 2000 to develop South Africa’s hydrocarbons resources, as well as to produce gas and condensate from offshore fields and convert them to refined products onshore. South Africa’s oil and gas reserves are predominately located in offshore fields to the west and south of the coast. At the end of 2009 proven oil reserves were estimated at around 15m barrels, according to the EIA’s Oil and Gas Journal. Offshore gas deposits total about 27.2m cu metres. The future of onshore gas deposits is under discussion, but estimates suggest that shale gas deposits in the Karoo Basin could be among the largest in the world (see analysis).

Most of the country’s oil production has come from three fields in the Bredasdorp basin: the Oribi, Oryx and Sable fields. South Africa’s first commercial production began at Oribi in 1997. PetroSA owns Oribi outright, along with a 60% stake in the Sable field. Despite the depletion of reserves, the Oribi and Oryx fields posted an 18% increase in production in 2010/11, from 1.07m barrels to 1.26m barrels.

Interventions to improve the performance of the wells have been credited for the hike. The Sable field began producing in August 2003, reaching production of 9700 bpd of oil in 2006. The field has since begun producing gas to supplement feedstock to the Mossel Bay GTL refinery. PetroSA also has exploration plans in numerous other sub-Saharan African oil-producing states, as well as in Venezuela.

The Petroleum Agency is responsible for managing exploration for oil and gas resources in South Africa, and has run several licensing rounds for offshore acreage. The country’s fourth offshore licensing round was launched in March 2009, offering two previously unexplored areas. The Orange Basin Deep-Water Licence off the west coast covers an area of 43,000 sq km, while the Tugela Licence off the east coast covers 48,798 sq km. According to the Petroleum Agency, there are now more than 300 exploration wells in South Africa’s entire offshore area, including appraisal and production wells. In March 2011 exploration activities were under way at nine locations off the west and south coasts, either owned by PetroSA outright or in a joint venture with national or international partners. International companies active in oil and gas exploration in South Africa include Australia’s BHP Billiton, Britain’s Q Venture Development and two US-based firms, Forest Oil and the Anschutz Exploration Corporation.

GAS COMES INTO PLAY: The gas industry in South Africa in particular is growing rapidly due to a range of promising discoveries. These include deposits in neighbouring countries, as well as offshore in South Africa, while onshore the Karoo region is believed to host massive reserves of shale gas.

Existing domestic natural gas fields include the F-A/ EM gas fields and their satellites, which have supplied the Mossel Bay GTL plant since 1992. Recent offshore natural gas discoveries include two undeveloped gas fields and a further six gas discoveries in the Pletmos Basin, as well as several additional gas discoveries in the Orange Basin, one of which is being appraised and developed as the Ibhubesi natural gas field by Forest Exploration International.

PetroSA’s F-O offshore gas project off the country’s south coast was approved in 2011, with development drilling expected to begin in 2012. With proven reserves, the field will extend the life of the firm’s GTL refinery in Mossel Bay. Production is expected by 2013 onwards. PetroSA is conducting ongoing exploration work in various blocks off the west coast, which the company believes hold great potential.

Major discoveries off Mozambique’s coast could also have an impact on South Africa’s energy mix. US-based Anadarko Petroleum and Italy’s Eni have both reported successful exploratory drilling, with Anadarko estimating that reserves in its fields could stand between 15trn cu feet (tcf) and 30 tcf of gas. Eni’s find of 22 tcf is the largest in the firm’s history.

“We could see a lot of the gas exported to India, China and Indonesia, but if South Africa can build the necessary infrastructure, it could transform the country’s energy environment,” Paul Eardley-Taylor, the head of energy, utilities and infrastructure for South Africa and Africa at the Standard Bank Group, told OBG. “It would require significant investments though, the funds for which may not be available.”

South Africa’s energy landscape could also be dramatically changed if deposits of shale gas in the Karoo are confirmed and extraction proceeds. Deposits in the Karoo are estimated to be in the region of 485 tcf, making it one of the largest in the world. A number of international oil firms are eyeing the region, led by Royal Dutch Shell, which has already conducted a technical assessment and has applied for exploration permits.

OPPOSITION: However, opposition to shale gas extraction – from Karoo landowners and from the environmental lobby – has been intense, raising doubts about whether it will take place. In 2011, the government placed a moratorium on licensing and exploration while the environmental implications of extracting the Karoo’s shale gas are considered, but actors across the sector feel confident that the government will eventually authorise further activity.

Indeed, after the moratorium was issued, the Petroleum Agency of South Africa announced that they hoped to hold as many as four onshore licensing rounds before the end of 2012.

While shale gas looks set to remain a controversial issue for some time, the country could still come to rely on it as a major energy source. Given the estimated reserves, it is likely that both international and South African firms will persist with efforts to explore the Karoo region, just as it is likely that public opponents will persist with efforts to block them.

COAL: BP figures show that South Africa had proven coal reserves of 30.16bn tonnes at the end of 2010, representing 3.5% of the world’s total or the ninth-largest reserves in the world. The reserves should last an estimated 50 years. South African coal is notable for being low quality and having low sulphur levels, resulting in large volumes of discards but also low exploitation costs. The country has become a world leader in using low-quality coal, especially for power generation and synthetic liquids.

South Africa is the world’s seventh-largest producer of coal. In 2010 production reached 143m toe, up 1.3% from 141.2m toe the previous year. Most of the coal produced is consumed locally as feedstock for electricity and synthetic fuel production, rather than as a final energy product. Coal accounted for 73.4% of South Africa’s primary energy in 2010, and 90% of its electricity. The IRP 2010-30 has committed to reducing South Africa’s dependence on coal, decreasing its contribution to the energy mix to 65% (see analysis).

Despite these commitments, two additional coal-fired power stations are being built in Kusile and Medupi, each with a capacity of 4800 MW, making them among the largest in the world. Construction is being supported by several loans from development finance institutions, including the World Bank, the US Export-Import Bank and the African Development Bank. The Kusile plant in Mpumalanga province and the Medupi plant in Limpopo province, estimated to cost R85bn ($10.4bn) and R100bn ($12.2bn), respectively, have both been criticised for the significant contribution they will make to South Africa’s carbon emissions.

Medupi’s annual carbon dioxide output alone will increase the energy sector’s emissions by 9.2%. But proponents of the projects point to the state-of-the-art technology – flue-gas desulphurisation – being installed in both plants, which will help to reduce sulphur dioxide emissions. The first unit in Medupi is due to be commissioned in 2012, while Kusile is expected to come on-stream in 2017.

DOWNSTREAM ACTIVITIES: South Africa’s crude oil refining capacity is approximately 523,500 bpd, which is the continent’s second-largest following Egypt. The country’s four crude oil refineries are all privately owned and operated by international majors, bar the Natref Refinery in Sasolburg, which is a joint venture between South Africa’s Sasol and Total South Africa. However, demand is rapidly outstripping the available local supply, a situation that has been compounded by the age of the country’s existing refineries. It is estimated that soon South Africa will be required to import substantial volumes of processed fuel to meet this demand.

PetroSA is planning to build a massive new refinery in the Eastern Cape, which would significantly increase refining capacity and also create new employment in the region. The $9bn Mthombo refinery has been designed with a capacity of 360,000 bpd, which would go some way to reducing South Africa’s predicted 180,000-bpd shortfall of petrol and diesel by 2020.

Outlined in a government strategy paper in 2007, the Mthombo refinery has also been criticised as unnecessary by some actors in the sector, who suggest that demand for petroleum products will in fact decrease. The capacity of the refinery has already been revised downwards, and the company is expected to make a final decision on the project’s size during 2012. The refinery is scheduled to be commissioned in 2015, and will process heavy sour crude.

REFINERIES: Of the existing crude oil refineries, South African Petroleum Refineries (Sapref) is the largest in all of Southern Africa, with 35% of the country’s refining capacity. BP Southern Africa and Shell SA Refining own the facility, south of the east coast city of Durban, as a joint venture. The capacity of the Sapref site is 180,000 bpd, and its annual capacity is some 8.5m tonnes. Output in 2010 was divided into various fuel types: 40% diesel and jet fuel, 28% marine fuel oil and specialties, and 25% petrol. Tseke Benny Nkadimeng, the CEO of Afric Oil, told OBG, “Given the cluster of know-how, labour and technology in Durban, there would seem to be more incentive to expand fuel handling and production facilities there.”

Also in Durban is the Engen Refinery (Enref), with a capacity of 135,000 bpd. Enref is owned by South Africa-headquartered Engen, which is majority-owned by the national oil company of Malaysia, Petroliam Nasional, better known as Petronas.

A nearby lubricants blending plant supplements Engen’s capacity, blending some 8m litres of finished lubricants every month. US-based international oil major Chevron owns the 100,000-bpd Chevref refinery near Cape Town. Products from the refinery include gasoline, diesel, jet fuel, liquefied petroleum gas, fuel oil and paving asphalt, although the refinery was due to be partially shut in early 2012 for a scheduled maintenance and safety inspection.

Natref, owned by Sasol and Total, has recently been expanded, increasing its capacity to around 108,500 bpd at a cost of R705m ($86.3m). Unlike the coastal refineries, Natref works predominantly with medium-gravity crude oil rather than heavy fuel oil, producing increased volumes of white product.

PetroSA’s Mossel Bay refinery, the world’s second-largest GTL refinery, will now be sustained by the new F-O field. With production from the field set to begin by 2013, the Mossel Bay refinery is now expected to continue commercial operations through 2019/20. Further gas projects near the F-O could extend the refinery’s lifetime by another five years. The refinery uses a modified form of the Fischer-Tropsch process to produce liquid fuels. The maximum capacity of the plant is approximately 36,000 bpd. PetroSA’s feedstock production – which is destined for the GTL refinery – increased by 26% in 2010/11 over 2009/10, while output from the facility rose from 5.3m barrels to 7.15m barrels over the same time period.

The Sasol Synfuels plant in Secunda processes and refines both coal and gas, but with coal its primary feedstock. The plant uses Synthol reactors to produce synthesis gas from coal or gas, which is then converted into a variety of liquid fuels and chemical products. With a capacity of around 150,000 bpd, the company is expecting to see output of some 7.3m tonnes in the 2012 financial year, despite industrial action that reduced output to 85% of capacity.

IMPROVING DISTRIBUTION: South Africa’s energy distribution network comprises pipelines and other transportation options delivering oil, gas, various liquids and refined petroleum products, as well as electricity distribution infrastructure. Both networks are under significant strain, although a new Durban-Johannesburg pipeline that is being commissioned in sections will ease the pressure and support the liquid fuels market. State-owned transport and logistics group Transnet manages South Africa’s strategic pipelines through a subsidiary, working with all the major local fuel firms. The pipeline network – at a total length of around 3000 km – handles annual throughput of 16bn litres of liquid fuel and over 450m cu metres of gases.

The primary long-distance pipelines include the refined products pipeline that links the coastal refineries in Durban to the Sasolburg refinery, traversing several provinces. The Temane-Secunda gas pipeline brings gas flows from Mozambique into Secunda, with another pipeline linking Secunda to Durban via Newcastle and Richards Bay. “South Africa is fully utilising all of its fuel distribution capacity, including pipelines, rail and road,” Paul O’Dwyer, the general manager of supply and distribution at Royal Dutch Shell South Africa, told OBG.

In January 2012, the first fuel began to flow through a new R23.4bn ($2.9bn) multi-product pipeline running from Durban to Jameson Park, south of Johannesburg. Transnet was awarded a construction licence by NERSA to build the 555-km pipeline in 2007, and the work began in 2008. The pipeline will replace the existing Durban-Johannesburg fuel pipeline, which is nearing the end of its lifespan, and help supply Gauteng Province, which is the country’s economic centre. Three pump stations have been built and storage terminals in Durban and Johannesburg are being completed.

Once the pipeline is fully commissioned – which is expected to happen in 2013 – various fuels will be transported at a capacity of 1m litres per hour. Until the terminals are finished, the pipeline will operate at 50% capacity and only diesel will be transported.

SUPPLYING THE GRID: Eskom – one of the world’s top 20 utilities by generation capacity – has a maximum self-generated capacity of 41,194 MW. It supplies 95% of the domestic market’s needs, as well as exporting a small amount of power to neighbouring countries. Around 45% of end-users in South Africa are supplied directly by Eskom, while redistributors – including local municipalities – resell the remaining 55%. Municipalities account for 40.8% of electricity sales, with industry and mining following at shares of 26.6% and 14.5% share of sales, respectively. Municipalities themselves, along with some large private companies, generate the additional 5% of electricity consumed in South Africa.

With years of underinvestment resulting in limited capacity and a distribution network under strain, Eskom has been criticised for failing to plan ahead effectively. An electricity crisis in 2008 pushed Eskom to introduce load shedding in an attempt to preserve the integrity of the grid. Electricity demand is rising by 3% per annum, and in 2009 it was estimated that South Africa would require an additional 5000 MW of electricity – including both base load and peak generating capacity – over the following five years. The Medupi and Kusile coal-fired stations will contribute significant capacity, but with the first units scheduled to be commissioned at Medupi in mid-2012 and Kusile by 2013, Eskom has been operating with very low reserve margins. The recently promulgated IRP also seeks to address South Africa’s power shortfall, engaging IPPs and significantly increasing the contributions of renewable and nuclear sources to the energy mix (see analysis).

South Africa’s electricity distribution network is also in need of attention. In March 2011, the deputy energy minister, Barbara Thompson, noted that infrastructure and maintenance backlogs were estimated at around R30bn ($3.7bn) and growing at a rate of about R2.5bn ($306m) a year. The minister’s comments came as responsibility for electricity distribution was transferred back to the Department of Energy (DoE) from EDI Holdings, a state-owned company that was created in 2003 to restructure the distribution system. The department will be working with the Treasury to source funding for the necessary reforms.

RENEWABLE SOURCES & ENERGY EFFICIENCY: Significant commitment to renewable sources was announced in the IRP 2010-30, which should see them account for 42% of additional generating sources, or a total of 17.8 GW, by 2030. This additional capacity, combined with the 1.025 GW committed before the iteration of the IRP, should see renewables accounting for some 9% of electricity demand by 2030 (see analysis). The government also launched the first round of a procurement process in August 2011, announcing its preferred bidders for various wind and solar projects totalling 1416 MW of capacity.

“Renewables are a no-brainer and the government recognises this,” Eardley-Taylor of Standard Bank told OBG. “Their development will help to promote energy security, grid dispersal and job creation, and they will also become price-competitive.”

South Africa’s renewables targets are not only driven by the need to develop additional generating capacity to satisfy the rapidly increasing domestic demand for electricity, but also to cut greenhouse gas emissions. The country is the world’s 13th-largest greenhouse gas emitter, with levels similar to industrialised countries, due to its heavy reliance on coal.

Along with other targets, South Africa has announced commitments to reduce energy intensity by at least 10% by 2015, in part by implementing efficiency standards. These are primarily directed at the industrial and transportation sectors, as well as commercial, residential and public buildings.

Launched in 2010, the Industrial Energy Efficiency project aims to realign industrial energy practices through the implementation of a system of energy management standards, as well as via incentives to encourage their adoption in certain industries.

Other initiatives include the retrofitting of government buildings to make them more energy-efficient, the labelling of household appliances and the incorporation of energy efficiency standards into the country’s building code. A newly revised Energy Efficiency Strategy is expected to be published in the near future as well, replacing the 2004 strategy that targets a 12% reduction in final energy demand by 2014.

NUCLEAR: The IRP includes nuclear power as a key alternative electricity source second only to renewables, to ultimately account for 23% – or 9.6 GW – of new capacity. As well as being considered clean and efficient, a nuclear component to the IRP gives South Africa more traditional baseload capacity while storage methods for renewables are improved.

Currently, the country has two 900-MW nuclear reactors situated at the Koeberg Nuclear Power Station that provide around 6% of the country’s electricity needs, the first of which was commissioned in 1984. Consumption of nuclear-generated electricity stood at 3.1m toe in 2010, level against 2009.

The Koeberg Nuclear Power Station is the only nuclear power station on the African continent and uses a pressurised water reactor design. The government’s commitment to further develop nuclear power is strong, however, especially given the country’s current heavy reliance on its finite supply of coal and the substantial carbon footprint this generates.

South Africa can also benefit from considerable uranium deposits, with estimated reserves of 295,000 tonnes, or 5% of the world’s total, according to “Uranium 2009”, a study by OECD Nuclear Energy Agency and the International Atomic Energy Agency (IAEA).

It is anticipated that South Africa may build up to a total of six nuclear power plants, which would be run by Eskom but constructed by the private sector. According to the IRP’s schedule, the planned nuclear facilities will come on-line in 2023, with the full 9.6 GW of new nuclear capacity reached by 2029.

The government is carrying out an assessment of the country’s readiness for the expansion of its nuclear power programme, which is expected to be completed by May 2012. This review, which began in November 2010, is being conducted in accordance with the IAEA “milestones approach”. The local review will then be followed by the IAEA’s external assessment, due to be finished by October 2012, according to a March 2012 statement from the DoE.

At the same time, the government is also preparing a report on the potential environmental impact of the proposed nuclear programme. A draft version of this report, which was published in 2011, identified Thyspunt, between Oyster Bay and St Francis Bay, as the preferred site for the country’s first nuclear plant. The government’s final report on the environmental impact is likely to be finalised by the end of 2012, Dipuo Peters, the energy minister, told parliament in April 2012.

While the total cost of the nuclear power project remains unknown, a government budget proposal released in early 2012 indicated that the state had budgeted R300bn ($33.7bn) for the building of the 9600 MW of nuclear power. However, in March 2012, Peters told the press that the final figure could in fact be much higher. Indeed, in September 2011 she had said that the tender proposal for construction of the six nuclear power plants could be worth at least R1trn ($122.4bn), making it the most valuable public tender ever issued by the country.

Reports suggest that firms from Russia, the US, France, Japan and South Korea have been angling for the contracts. In April 2012 Rosatom, the Russian state atomic energy corporation, presented its proposal for nuclear power plant construction in South Africa at a seminar co-hosted by the Nuclear Industry Association of South Africa. Similarly, Seoul has been increasing its efforts to support the export of nuclear power plants by South Korean companies. In March 2012, the president of the Asian state met with South Africa’s President Jacob Zuma at a conference in Seoul, with the two agreeing that their countries would continue to cooperate on nuclear power development.

OUTLOOK: South Africa’s energy landscape is defined by increasing demand and limited capacity. While the economy has in the past suffered due to a shortfall in power supply, the government has launched major efforts to diversify its electricity generating capacity, reduce its dependence on coal and seek alternative sources of hydrocarbons. In addition, the country is looking to improve its energy infrastructure, both in terms of transportation and distribution. Many of these initiatives present significant opportunities for private sector companies, suggesting that – provided adequate financing can be secured – South Africa’s energy sector offers good growth potential for investors.