ENVIRONMENT: Energy Trading in Southern Africa

By James Hall Reprint | | Print |

James Hall

MAPUTO, Mozambique, Dec 20 2002 (IPS) - ‘’Energy trading” is the buzzword amongst government policymakers in the 14 member states of the Southern African Development Community (SADC), and from arcane policies have resulted more secure and plentiful power supplies for business and residential electricity users.

Energy trading, where nations buy and sell surplus power through an ever-widening network of electrical lines and relay substations, was up 20 percent last year, a time that also saw the completion of several key regional infrastructure projects.

‘’These projects, like the region-spanning 400 kV lines fanning out from South Africa, will further facilitate energy trading,” said Bruce Farrer, managing director of the Swaziland Electricity Board at a recent SADC Energy Technical and Administrative Unit Executive Committee meeting in Swaziland.

‘’The beauty of energy trading is it allows nations to benefit from erratic weather, rather than to constantly suffer from too much or too little rain that affects power generation,” a Tanzanian delegate told IPS.

Hydroelectric generation depends on river levels. Last year in Swaziland, energy minister Magwagwa Mdluli told IPS, heavy rains allowed the country to generate 5 percent of national power needs at Swaziland’s only power plant, located on the Lusushwana River. 2002, however, saw rains cease. World attention has focused on the food crisis that resulted from crop failures, but a lesser crisis occurred when hydroelectric generating capacity shrunk. As a result, Swaziland is now almost totally dependant on electricity imports from neighbouring South Africa.

2002 has seen the successful completion of a 400 kV line connecting South Africa and Namibia, and similar lines running from South Africa through Swaziland to Maputo, Mozambique, terminating at the new Mozal aluminum smelter.

‘’The projects will undoubtedly enhance energy trade between these countries,” Farrer told IPS. ‘’Combined with this have been improvements in the operation of the Southern African Power Pool (SAPP), which have reduced inadvertent power flows and power oscillations.” With all SADC member states except the island nation Mauritius involved in regional power pool, financing for capital-intensive energy producing projects will be facilitated when these proposals are presented to international lending organisations like the World Bank and the African Development Bank, one energy industry official told IPS.

Energy-producing facilities, be they hydroelectric, coal, solar or nuclear, are tremendously expensive undertakings. Impoverished Southern African nations have found there is power of another kind in numbers, and they have combined to pool resources.

South Africa, Mozambique and Swaziland, for example, have become the tri-nation members of the Lubombo Spatial Development Initiative (LSDI), named after the Lubombo mountain range the countries share. The three nations have benefited from the energy needs of the new Mozal Aluminum Refinery, located on the outskirts of Maputo, the capital of Mozambique.

The plant, which is central to LSDI, requires 45 megawatts of electricity when fully functioning. This was approximately twice Mozambique’s entire electricity consumption last year. Because the amount was beyond local generating capacity to produce, the 400 kV line linking the plant with South Africa was constructed. The line passes through Swaziland, and extends northward to the Democratic Republic of Congo. Power can be moved, bought and sold to any country along the line.

A spokesperson for the Swaziland Electricity Board said the line affords an opportunity for all connected nations to import electricity, and sell surpluses. ‘’This will allow Swaziland to avoid persistent blackouts that plague our industrial and residential consumers,” he said.

The three nations’ utility companies formed a new company MOTRACO to build and run the power line, giving permanent employment to 800 and creating 9,000 jobs during the construction phase.

Petroleum is a second key energy source that is being processed and exported to meet Southern Africa’s needs, and to fuel expanding industries. Mozambique’s state-owned fuel retailing company, Petromoc, is looking for new foreign partners in the wake of its successful joint venture deal with the South African energy firm, Sasol. That enterprise is called Petromoc e Sasol.

‘’From Mozambique’s point of view, joint ventures offer the capital we need to exploit our growing market of private and industrial petrol consumers. The partners gain ground-level access to this burgeoning market, ” a source at Petromoc told IPS. 12 million U.S. dollars will be spent by Petromoc e Sasol to open 20 service stations in Mozambique by 2006. A full line of petroleum products will be sold. Sasol is minority shareholder of the venture, controlling 49 percent of the company.

The company will target areas where the petrol market is expected to develop. Mozambique is making great strides recovering from a lengthy civil war, and is the recipient of growing foreign investment in the energy sector.

In another development, a pipeline is nearing completion that will permit the importation of Mozambique natural gas into South Africa for industrial use. The line runs from Maputo, through South Africa’s mountainous Mpumalanga province, and down to Gauteng, where Johannesburg and Pretoria’s industrial estates will ultimately consume the gas.

Coal is the third leg of the region’s energy infrastructure. Swaziland’s once-thriving mining sector has been reduced to a single coal mine, though production is good. All coal extracted is exported to South Africa.

The region’s energy sectors face the same challenge as other segments of their nations’ economies: how to empower a greater number of previously disenfranchised business people so they might reap the benefits of this lucrative field?

South Africa intends to ease the way for new investment in the nation’s mining sector with a new Mineral and Petroleum Resources Development Bill.

The law seeks ways to empower black African companies who have been kept out of prospecting ventures because of a lack of capital. In the past, such companies have also been hindered from obtaining prospecting rights by difficult requirements, such as a previous record of success in mining.

One suggestion has been to grant mining rights black empowerment companies and other newcomers to the sector. These rights could then be used as collateral to secure bank loans.

Giant state utility companies still tend to monopolise the energy sector, but mining ventures can be a way for new players to benefit from SADC’s current energy boom.