UK trade envoy says Eskom’s blackouts are powering foreign investment in renewables

11 Oct 2023

Britain is seeking to expand its already large renewable energy footprint in SA, says UK trade envoy for South Africa, Andrew Selous.

South Africa’s notoriously erratic electricity supply has both discouraged and encouraged investment. It has surely repelled a lot of general investment – because foreign businesses, like local ones, obviously need a reliable power supply.

But it has, conversely, stimulated considerable foreign investment in renewables.

So, for instance, Andrew Selous, the UK trade envoy for South Africa and Mauritius, points out that Eskom’s woes are driving significant UK commercial and industrial investment into renewable energy, making Britain the “biggest foreign investor in renewable energy in South Africa”.

That investment is through companies like Globaleq which is operating two wind farms and six solar farms with a total capacity of 384MW and supporting around 1,300 jobs at the moment, plus building out a lot more.

British International Investment, the UK’s development finance institution, owns 70% of Globaleq, Selous said in an interview in Cape Town.

The UK’s Solar Century is developing, building, owning and operating solar power plants, including battery storage, while Gridworks is helping to expand the electricity grid capacity.

The biggest UK investor in SA by far, though, Selous said, is Hive Energy which is building a £5-billion green ammonia production plant in the Coega special economic development zone in the Eastern Cape.

“Green ammonia will be what powers the maritime shipping industry in particular to make sure that it’s green. There’s a lot of focus on green aviation as aviation often gets the criticism of the climate activists. But I think shipping has a bigger carbon footprint.”

Selous adds that with 80% of the world’s platinum group metals, SA has great potential to collaborate with the UK’s ITM company with its expertise in electrolysers, to produce hydrogen. ITM already buys most of its platinum group metals – which it uses as catalysts in its electrolysis – from SA.

This would be “a great marriage, a great synergy of skills and resources that can work in a very mutually beneficial way for both countries”, Selous says.

He also punts the ambitions of Rolls Royce to make South Africa the hub for its plans to build small modular nuclear reactors across sub-Saharan Africa, which he says would create many jobs and bring in technical expertise.

Selous said several British companies here were now producing their own electricity, notably Rio Tinto, the huge Anglo-Australian mining company, which owns the titanium mine, Richards Bay Minerals (RBM).

He said it was now investing about $500-million in renewable energy, both solar and wind, to power its huge operations, including the extension into the Zulti South facility which will prolong the titanium operation for another 25 years.

Selous says RBM is the largest UK taxpayer in KwaZulu-Natal and probably also the largest employer, with about 5,000 staff.

‘Most important’ partner in Africa

Selous sees himself as providing continuity in helping UK companies trade with and invest in South Africa and South African companies who want to trade with and invest in the UK, as he has been in the job just over six years, during which Britain’s turbulent Conservative Party government has cycled through seven African ministers.

South Africa is “huge, our most important trading relationship with Africa”, with R258-billion of combined trade annually – a quarter of the UK’s trade with the whole of Africa.

“And our stock of foreign direct investment is R512-billion, which is half of the UK’s investment in the whole of Africa.”

That investment stock across the continent, at $65-billion according to the UN, he says, is larger than any other country’s, including China or India.

Beyond renewable energy, Selous cited many British businesses active in SA and particularly Cape Town.

Like Capita, which he says has created 5,000 jobs and is expanding. It provides business processing advice and call centres.

Selous said he was very impressed with how much care Capita takes in looking after and training its employees – especially by giving many young South Africans entry into the market through their first jobs.

The Western Cape and City of Cape Town government were assisting with Capita’s job creation.

He said other UK companies like Rio Tinto, Land Rover and the engineering firm Babcock were also doing training well.

“But I would like that to be a hallmark of how British business operates in South Africa… to see if we could do more in knowledge exchange and skills training, perhaps more formally, government to government.”

The UK-owned Henley Business School in Cape Town –“consistently voted the Number 1 location to do an MBA in Southern Africa” – was playing a key role here.

Selous said Ramaphosa’s economic advisers were keen to take up the project. He met Jomo Sibiya, Donné Nicol, Anthony Costa and Lawrence Matemba – who heads Ramaphosa’s investment drive – mainly to discuss what more could be done to encourage further British investment.

The advisers also met heads of several British companies, including banks, financiers, investors, big energy companies, manufacturers and miners, who reported on the issues they were facing. These obviously included frequent power outages as well as railway and harbour bottlenecks and security concerns.

“For Rio Tinto in particular, having a well-functioning railway and port system is pretty mission-critical to their operations,” he noted.

The business people acknowledged what the Presidency was already doing to tackle these problems, and last week’s changes in the top leadership of Transnet provided further assurance.

And the advisers were not defensive. There was a common agreement with the UK businesses to solve South Africa’s problems together.

“We want a strong government-business partnership, which is a statement of the obvious. Wherever you go around the world, there are very few governments which have the available tax-raising and borrowing firepower to do everything that needs to be done. So the name of the game is private sector investment.”

Some British businesses were also trying to improve Transnet’s rail operations by addressing underlying systems problems as well as tackling security issues like the massive theft of cabling and even girders on the railway line. He would not elaborate.

Investment means income

Selous noted that increasing trade and investment also increased social stability and security and reduced crime by creating jobs.

“And that’s one of the reasons I’m very passionate about this role, because I see the difference it makes in changing lives and providing real-life chances for people in terms of dignity in having an income and putting food on the table.”

Selous also met founders of local IT tech startups on how the UK could support them. He noted that local startups were encountering problems around protecting their intellectual property and welcomed the legislation which he said was coming to address that.

He cautioned that tech businesses were global and highly mobile by nature and would move to jurisdictions which enabled them to trade most successfully – including the UK – which would welcome them.

The advocates of the startup legislation which Selous cited, have warned that many SA tech innovators have already left the country because of inhospitable policies, including strict labour and BEE requirements.

Apart from what its companies are doing, the British government’s own major contribution to addressing South Africa’s energy crisis is through its joint financing, with Germany, France, the US and the EU, of $8.5-billion for the Just Energy Transition Partnership (JETP).

This is supporting South Africa’s transition from its high dependence on coal-fired power generation towards renewables while ensuring that coal miners and their communities are not left behind.

Some of the JETP partners are growing impatient for Pretoria to produce a detailed plan of bankable projects to be financed with the $8.5-billion.

“As I understand it, at COP28 in two months, the details of the SAG energy investment plan will be spelt out,” Selous said.

“I think we absolutely need to move forward at pace with real urgency to get these things done. Because time costs money, delays cost money. And we live in a competitive world,” he added, cautioning that “investors have choices” and no investment should be taken for granted.

He noted that the UK’s cheapest electricity was from offshore wind and that the return on investment in solar was “very attractive.”

Greater investment in renewables was also needed to help South Africa avoid the carbon border adjustment mechanisms – in effect, tariffs on high-carbon imports – which were looming in the EU, UK and elsewhere.

These have been deplored by Pretoria and others. But Selous said, “There’s no point in greening your own economy and then importing loads of goods which have been made through coal-fired power stations.”

He nevertheless exudes boundless optimism that South Africa is well advanced on its green economy journey.

“I think that SA will be a regional global energy superpower in time. You are blessed with so many natural advantages; sunshine, wind, your huge coastline with potential for floating wind and tidal… You have the only functioning nuclear power station in the whole of Africa, if you choose to go down the nuclear route as well.

“You’re very blessed with the platinum group metals. I know the problems seem very challenging. But I think there’s a very bright future, which is why the UK-SA trade and investment relationship will remain, I’m convinced, a very strong, important and significant one for decades to come.”

Selous disclosed that the UK had invited Ramaphosa to give the keynote address at its African investment summit in London on 23 and 24 April – though he said his government realised the President might not make it because of imminent national elections back home. London hoped that a senior SA minister at least would give the address.

He noted that at the last investment summit in 2020 £6.5-billion worth of deals had been done, rising to £15.5-billion a couple of months later. DM

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‘Most important’ partner in Africa

Investment means income