Latest news with #CreditGuaranteeVehicle
IOL News
01-08-2025
- Business
- IOL News
Treasury sets the stage for infrastructure overhaul with R1. 8bn credit guarantee vehicle
Deputy Minister of Finance David Masondo said on Thursday that the government has committed to injecting an initial R1.8 billion into a newly established Credit Guarantee Vehicle, with plans to escalate the total investment to R9bn if needed. Image: Supplied The National Treasury has taken a step towards addressing South Africa's staggering infrastructure gap, which is projected to reach around R3.5 trillion to R4trln by 2025. Deputy Minister of Finance David Masondo said on Thursday that the government has committed to injecting an initial R1.8 billion into a newly established Credit Guarantee Vehicle, with plans to escalate the total investment to R9bn if needed. Speaking at the launch of the pre-qualification process for Independent Transmission Projects (ITP), Masondo highlighted the urgency of the situation. He noted that at least 32 development partners have expressed interest in investing in the new scheme, which aims to rally private capital to bridge the nation's infrastructure financing gap. "Formal engagements with participating partners are continuing and will lead to the delivery of conditional equity participation commitment letters in the third quarter of 2025," Masondo said. "This will enable the Credit Guarantee Vehicle to be operationalized by July 2026 to align with the first phase of ITP projects." He said the infrastructure gap called for scaling up of public financing as well as crowding in private capital through public-private partnerships (PPP). "The objective of the Credit Guarantee Vehicle is to mobilize and leverage private capital to address South Africa's infrastructure financing gap by mitigating offtake risk for private investors," Masondo said. "This vehicle will also support the efficient deployment of development partner funding under the Just Energy Transition Partnership (JETP) and the achievement of the country's decarbonisation commitments." Masondo said while the Credit Guarantee Vehicle will focus on the initial phase of enabling investments in transmission infrastructure, it will be expanded into other areas such as logistics and water over time. "The vehicle will be incorporated as a private company in South Africa, regulated by the Prudential Authority. It will operate as a standalone entity with an independent balance sheet and will target a minimum credit rating of AAA," he said. "A professional executive management team and board of directors with relevant experience and expertise will be appointed to operate and manage the fund. The Credit Guarantee Vehicle will issue a combination of payment and termination guarantees to a Special Purpose Vehicle established for the project." Speaking at the same occasion, Electricity and Energy Minister Kgosientso Ramokgopa said the proposed amendments to the Integrated Resource Plan (IRP) 2019 anticipate the onboarding of more than 30GW of renewable energy by 2030 and approximately 56GW of new connections by 2035. "That's an aggressive programme. For that to happen you really need the transmission infrastructure to be in place," he said. "Major players in the renewable space will tell you 53GW of private sector sponsored projects that are waiting for this connection are at various stages, but its just an indicator of the insatiable appetite that exists in the private sector." In this context, he discussed the initial phase, which encompasses 1 164 kilometers with a capacity of about 2 600 MVA, projecting that unlocked renewables could produce an impressive 3 322 megawatts. He acknowledged that Eskom had historically delivered around 350km per annum, but stressed the necessity to scale up infrastructure development. "It's about the maturity and readiness of local industry because we have not done a significant build programme over a continuous uninterrupted period. We have undermined the capacity of industry to respond to opportunities of this scale," Ramokgopa said. "That is an immediate risk that's facing us that's why we will be engaging with the industry to see how best they are ready and of course build up that capacity over time." BUSINESS REPORT
Daily Maverick
01-08-2025
- Business
- Daily Maverick
Government launches R440bn private transmission gamble to end load shedding
Electricity Minister Kgosientsho Ramokgopa and the National Treasury have unveiled an ambitious plan to build 14,500km of transmission lines and 133,000 megavolt-amperes of transformer capacity by 2034 at an estimated cost of R440bn. At the JSE on Thursday, Electricity Minister Kgosientsho Ramokgopa launched the Request for Pre-Qualifications (RFP) of a high-stakes transmission programme aimed squarely at ending load shedding. South Africa's energy problem is no longer just about generation. The real choke point lies in transmission capacity, with tens of gigawatts of renewable energy trapped behind constrained networks. The Transmission Development Plan (TDP) is meant to address this, adding 14,500km of lines and 133,000 megavolt-amperes of transformer capacity by 2034. Without this build-out, energy challenges will remain no matter how much is generated. Industry bodies such as the South African Photovoltaic Industry Association agree. Its CEO, Dr Rethabile Melamu, said: 'The future of South Africa's energy system relies not just on how much we build, but on how efficiently we connect it to the grid.' What's in a Credit Guarantee Vehicle? At the heart of the plan is a Credit Guarantee Vehicle (CGV) that de-risks private investment without creating new state guarantees. In simple terms, it provides payment and termination guarantees to private funders if a large infrastructure project stalls. This makes investing in the grid more secure. The CGV targets an initial $500-million (around R9-billion) raise, with the National Treasury providing 20% first-loss capital (about $100-million, roughly R2-billion via a World Bank loan), scalable to $500-million if needed. It will operate as a private non-life insurer under the Prudential Authority, aiming for an AAA rating, and launch is planned for July 2026. Premiums will be recovered through the electricity tariff. The initial focus will be on energy transmission, with potential expansion to logistics and water. Speaking at the RFP launch, Deputy Finance Minister David Masondo said the introduction of independent transmission projects was a key objective of Operation Vulindlela Phase II, and would play an important role in the broader reform of South Africa's energy system. 'This reform includes the introduction of a competitive electricity market, which will allow multiple generators and traders to compete to provide electricity to consumers at the lowest cost and with the greatest efficiency,' he said. 'The reform of our energy system is advancing rapidly, and our commitment in this regard remains unwavering. We will not allow any vested interests to delay or obstruct this reform process, including Eskom itself.' South Africa urgently needs to resolve its transmission crisis. Load shedding has disrupted daily life and exacted a heavy toll on jobs, investment and GDP. A Cresco Energy Market Transitions report released by Standard Bank Corporate and Investment Banking in June warned that grid connections and transmission delays, rather than tariffs, were now the main roadblock to an energy secure future. This is confirmed by the fact that several renewable projects from Bid Window 7 are stuck waiting for grid access, threatening investor confidence and project timelines as companies better understand their round-the-clock power needs. But beware the tale of Karpowership On 31 July, after a three-year legal battle, the Gauteng Division of the High Court in Pretoria set aside the generation licences that the energy regulator, Nersa, had awarded to Karpowership. The Organisation for Undoing Tax Abuse (Outa) hailed the decision as a public-interest victory. 'The Karpowership deals are now absolutely dead. It will never be loaded onto your electricity bill,' said Outa's executive director, advocate Stefanie Fick. The murky water of the proposed deal combined with its cost is illustrative of the potential risk of emergency procurement and the importance of the ITP keeping within the lines of a transparent, programmatic approach. What this means for you If executed on time, the ITP could help end load shedding, unlock private capital and boost local manufacturing of towers, cables and transformers. Challenges remain with the possibility of landowner disputes, union resistance, regulatory delays and equipment lead times. Any slip risks leaving renewable energy stranded. The ITP's success will depend on whether a credible procurement process can translate into steel towers, substations and new lines fast enough to avoid a relapse into blackouts. If this gamble pays off, it could see South Africa taking a major step forward to closing the load shedding chapter. DM
