A Glimpse Abroad

A Glimpse Abroad

Have you noticed what's been going on in South Africa (SA)? Just a brief reminder that developing countries are also grappling with energy demand and efficiency issues.

In a nutshell, the richest nation in Africa is experiencing an electric power crisis similar to what we saw in California at the turn of the century. As demand for electricity has risen, the public utility, Eskom, has not built more generating capacity and infrastructure to keep up. Now they have reached the point that businesses are experiencing power cuts and this is impacting the economy. And the effects are not isolated. For example, gold and platinum prices have risen on world markets because SA mines have been hit by outages. And SA is preparing to host one of the world's largest sporting events, soccer's World Cup, in 2010.

Why didn't Eskom build more generation? The short answer is that price controls in the '80's and '90's kept consumer bills down but did not allow for infrastructure investment. Meanwhile, on a related note, SA is working with like-minded countries to block agreement in the World Trade Organization to liberalize trade in energy services and equipment.

Yesterday, SA's finance minister announced several new initiatives to address energy supply and efficiency: loan Eskom almost $8 billion to built new generation, introduce a tax on electricity generated by non-renewable sources, and to ramp up consumer rates to encourage more efficient use of electricity. According to the SA Treasury, tax incentives to encourage the uptake and development of renewable energy, such as accelerated depreciation allowances, are already in place and could be further enhanced.

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