Posted on March 20, 2014 in Interviews

I’ve been hearing about the potential for a huge power project at the Inga Falls in the DRC for about as long as I’ve been a journalist – in other words, for over ten years. When I first heard about it as a young, impressionable lass, I was hugely excited. Inga could generate virtually limitless electricity, and because it would be running off water power, input costs would be minimal, as would the environmental impact. Inga could power most of the continent, and would spur the development of an inter-connected African grid – really, the sky was the limit.

That was ten years ago, and the Inga project is still little more than potential, mostly because the persistent political problems and violence in the DRC region have put investors off in a big way. Apparently there’s some renewed interest in the project – the Americans are supposed to be keen on getting it going. However, the bald fact is that no one is going to invest billions in a power project when there is so much risk and uncertainty around the payoff. If Africa is going to see a renaissance this century, there must be a focus on fixing the persistent areas of conflict that continue to mar various regions. FD

ALEC HOGG:   Cape Town is the brain of South Africa.  Johannesburg though, is where the heart pumps.  Well, according to the International Monetary Fund, ensuring adequate energy flows to support the continent’s growth is very important.  This growth in the continent is expected to be in the region of three-point-three percent in 2015, and much more in the years thereafter.  We are joined now by Shamal Sivasanker, who is the Leader of the Infrastructure and Power Industry for Deloitte Southern Africa.  Shamal, we’ve heard a lot about the Power-Gen conference.  You were involved there as a moderator.

SHAMAL SIVASANKER:  That’s right, yes.

ALEC HOGG:   Did you leave there feeling more confident about the ability of those who make decisions on these things, to get their hands around the power challenges of the continent?

SHAMAL SIVASANKER:  Certainly, I think there were a number of key decision-makers who participated in Keynote Address, as well as in the session I moderated.  You had the Deputy Secretary of Energy from the U.S. involved, and Dr Steve Lennon from Eskom.  You had the Department of Energy through Dr Woolsey Barnard involved in that, and these are some of the key decision-makers involved in not just South Africa, but Africa – going forward.

ALEC HOGG:   We have a grasp of the issues, but it was poor timing when government decided potentially, to kill the shale gas industry in South Africa.  Was that discussed at all?

SHAMAL SIVASANKER:  I think the Power-Gen conference focused more on the power sector, versus the energy on the shale gas and the broader oil and gas sector.  Certainly, there’s been a lot of good interest in terms of the gas sector being developed in South Africa, but I think we are looking more along the lines of LNG versus shale gas, which is what you’re suggesting.

ALEC HOGG:   It’s not surprising.  We had Andrew Etzinger from Eskom here just before the conference, and he was terribly excited about the potential of converting shale gas into electricity, which I guess, is what Power-Gen was all about.

SHAMAL SIVASANKER:  Well, I think the focus was more around how to find solutions for Africa.  There’s a lot of interest in the IPP base load program that the Department of Energy is looking to launch in this calendar year.  There are many investors coming to the country now, looking at the successes of the renewable energy program, and how that can be translated into something bigger for the country, and we need it, quite frankly.

ALEC HOGG:   How many of those IPP’s are there likely to be?

SHAMAL SIVASANKER:  For the base load program, I think you’re probably looking at about…up to five to ten, maybe, over the forthcoming years.  Certainly, the focus is going to be on coal, gas, and hydro.  I think you’re going to find more takers for gas and coal, because those are the cheaper plants to put up and to run.  The big issue for them is what is the framework of this program going to look like?  I think there’s a lot of anticipation as to what the Department of Energy is going to put out in terms of the regulatory side and of course, the big issue on everybody’s minds is going to be ‘what’s the price going to be’.

ALEC HOGG:   I’m sure.  You did mention hydro just ahead of the conference.  Again, we had Earl Gast here from USAID, who was saying how the Americans are very keen to support the Inga Falls Project, which you’ll be well aware has been on the cards for a long time.  Was there much focus on that?

SHAMAL SIVASANKER:   There was a technical work stream around hydro on the conference, over the last two days.  I think there’s a lot of interest in developing hydro across the continent – not just the Inga example.  Ethiopia, as we know, is busy with that as we speak.  Certainly, the intention is for programs such as Power Africa, which is the Obama Initiative, to start playing a key role in developing those types of projects to commercialisation and acting as a catalyst for that.

ALEC HOGG:   We were told that Inga Falls, which could be the size of Eskom potentially, was put on hold because of problems in the DRC.  Does the fact that the Americans are now saying they’ll put money behind it, suggest that those problems are something of the past and we might be able to progress here?

SHAMAL SIVASANKER:  I think the Inga projects have always been tainted with these types of issues, and it stems from I guess, the issue of political stability and the economic viability to develop those projects.  Where we’re heading down now, is that you’re starting to see more donor-funded money going in there to try to progress and catalyse these projects to the point there would be state and commercial participation in these programs.  It’s a question of whether the investment criteria would be correct for these participants, going forward, versus saying that there’s a lot of risk involved in that.  Of course, there’s a lot of risks, and one of the biggest  issues has always been who the off-takers would be from these projects and whether we can wield that energy through an interconnected grid across Africa and back to South Africa.  South Africa’s going to have to a key role in that.

ALEC HOGG:   It’s strange that that’s even a question, given that we’re going through the issues we do have in South Africa at the moment, but I guess when Medupi come on stream, it might be different.  What about East Africa?  This is a continental channel.  We’ve heard a lot recently from guests, saying that the potential for power generation in East Africa through gas etcetera is very high.

SHAMAL SIVASANKER:  Very much so…  It’s not just gas.  It’s also geothermal because of the size of the big rift that goes all the way up to the Horn of Africa.  We’re seeing a lot of interest, particularly around Tanzania, where there’ve been new gas finds offshore.  Tanzania is an example of a country, which has suffered extensively in terms of economic growth because of power constraints.  What they’re looking at is to introduce IPP’s to compete with TUNESCO eventually, if they get into that kind of market.  Many countries are still hanging on to the type of model we have here in South Africa at the moment, where you do have a single buyer office to buy electricity from the market, so we’re still some way away from seeing that materialising in East Africa, as well.

ALEC HOGG:   You say ‘hanging on’.  It doesn’t sound as though you support that model.

SHAMAL SIVASANKER:  Well, it’s a moot point.  There are pros and cons to both.  The question is one of timing and one of affordability.  If you look at Tanzania’s case, it’s remarkably different from what we’re going through in South Africa and yet, there are similar signals.  In Tanzania’s case, the extent of the outages is well documented with regard to what it’s done to the economy in terms of slow-down.  We’re not at that point yet, but we could get there.

ALEC HOGG:   I’ll tell you something: in 2008 I think, I was in Davos with the then Governor of the Reserve Bank.  Tito Mboweni was the most outspoken, so I’ll use his name.  I’m sure he wouldn’t mind because he’s in the private sector now.  He was absolutely livid at the fact that Eskom at that time had the problems with not being able to deliver.  It’s strange…it’s almost as though you need an issue or you need a crisis before, within a government circle or political circles, you have the will to change things.  Do you think we might have seen that in South Africa?

SHAMAL SIVASANKER:  I think 2008 was the catalyst for that.  We had an opportunity in 2008, to start something different.  I think many lessons learned from 2008 – not just Eskom, but across the power industry and all its players, from the policy-makers, to the regulators, the government, and the consumers as well, for that matter – I don’t think we really implemented all of those, both demand side and supply side measures, which we could have taken.

ALEC HOGG:   So we wasted a good crisis.

SHAMAL SIVASANKER:  Absolutely.

ALEC HOGG:   Maybe we won’t waste the next one.

SHAMAL SIVASANKER:  I hope not.

ALEC HOGG:   Let’s hope there isn’t another crisis.  When talking to the guys from Eskom, they say there certainly is, but at least people are thinking about it.  People are getting together, applying their minds, and as you said right at the outset of this discussion, there are positive outcomes.

SHAMAL SIVASANKER:  The difference between 2008 and 2014 is that the consumer awareness is so different, and I think we have more awareness around the power sector in South Africa, than most other countries or developed countries for that matter, do.  The fact that we get into conversations about what our tariffs are, is a clear indication of that.

ALEC HOGG:   Thank you.  Shamal Sivasanker is with Deloitte.  He’s the Leader of Infrastructure and Power Industry at that company and he was one of the moderators at the Power-Gen conference, which has just concluded.