Political risk analysis of the Renewable Energy Sector in South Africa and the effect on Foreign Direct Investment

Over the past decade, a strong business case has been established for the exploitation ofrenewable energy sources (hereinafter referred to as RES) due to ongoing falling costs and the recognition by many countries that renewable energy presents the pathway to global energy transformation, energy security, and abatement of climate change. Furthermore, renewables can bridge the gap for energy-poor societies, thus creating opportunities for sustainable livelihoods for the millions of people who lack energy access throughout the global economy. However, despite these desirable outcomes, there are risks involved in the application of renewable energy that have understated the scale and strength at which they can be implemented. This dissertation is a political risk analysis of the renewable energy sector in South Africa, based on the 2011 government programme designed to attract investment in grid-based renewable energy generation. A political risk analysis studies a broad spectrum of identified factors and their impact on foreign direct investment for a chosen sector. The Albert Venter (2005) model will be used as a framework of analysis. This is an indigenous model that focuses on South Africa as it positions itself favourably for foreign direct investment (FDI) flows and participates actively in the global economy. Using this model, this dissertation reveals the political risks and complexities relating to the implementation of South Africa’s policy driven renewable energy projects through the Renewable Energy Independent Power Producer Programme (REIPPP). Risks relate to regulatory risks, socioeconomic risks, and the impact of global market changes on the local environment as well as the potential of political interference from government institutions. Corrupt practices such as those surrounding an oscillating nuclear deal, the desire to maintain monopoly in state owned Eskom and the tensions that emerge as a result of a historically unequal society where there is unequal land distribution and access to the grid, manifest in South Africa’s energy sector leading to a curtailment of FDI in the energy sector. Based on the above-mentioned pointers, South Africa displays friction as government navigates international and local concerns that are at odds with the advancement of a robust renewable energy sector and its implied effect on foreign direct investment amidst an environment of limited capital in the country.

Grantor

Department of Mechanical Engineering

Year dc:date.issued

2019

Author dc:creator

• Mokhele, Khothatso

Advisor dc:contributor.advisor

• Madhlopa, Amos

• Energy and Development Studies

Handle dc:identifier.uri

http://hdl.handle.net/11427/30868

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/30868