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Wednesday, 31 March 2010 13:53

Zuma addresses three major challenges that affect all South Africans

President Jacob Zuma’s State of the Nation Address, while attracting criticism for a dull tone from some quarters, has in others opened up discussion on some key economic opportunities on offer.

Opportunity assessed where some market openings for business are, in light of the policy proposals given by the president.

Renewable energy and the role that entrepreneurs can play in the provision of electricity have emerged as top talking points.

According to the State of the Nation Address, the government has established an inter-ministerial committee on energy to develop a 20-year integrated resource plan (IRP) for new-generation capacity for the country.

The committee is set to “look at the participation of independent power producers (IPPs), and protecting the poor from rising electricity prices,” according to Terence Creamer, who reported on the IPP issue in Engineering News.

The development is likely to mean that private sector participants will have the opportunity to help provide for South Africa’s urgent energy needs, while fostering competition and the development of green energy sources.

During a post-State of the Nation SAfm radio debate with Tim Modise, a host of energy entrepreneurs called in to the station, expressing their frustration with being unable to access the electricity market as a provider to the government and the general citizenry. The sentiment seems to reflect the growing desire of entrepreneurs to meet energy demands.

Perhaps now more than ever, the opportunity is here.

One firm, Genesis Eco-Friendly, seems indicative of such a desire on the part of the private sector. The firm lists “increasing demand for power” as the number-one reason it has invested in South Africa. Founded by Dr Eddie O’Connor and Fintan Whelan, former chief executive officer and corporate finance manager of Airtricity respectively, their core business is to develop, build and operate wind energy, solar, thermal and ocean current plants.

Genesis Eco-Friendly’s action plan includes partnerships with governments, utility companies, developers and investors across South Africa, Europe, and North and South America.

In addition to highlighting the long-term power generation shortfall facing the country, the firm also lists among its reasons for investment in South Africa, the “very positive signals from government to facilitate IPPs and promote clean and diverse forms of power generation”.

While time will tell as to the success of the president’s declared State of the Nation commitment to partner with private players, he seems to have succeeded in generating some confidence among non-public suppliers that have chosen positively to set up shop in South Africa; this despite the challenging environment and endless complaints against Eskom’s monopolistic powers.

While President Zuma’s stated aim to “establish an independent system operator, separate from Eskom Holdings”, is in motion, he added that “Eskom will continue to build additional generation capacity and improve the maintenance of its power stations”.

He further pledged to “support efforts to speed up the political and economic integration of the Southern African Development Community (SADC), and promote intra-regional trade and investment”.

Local businesses looking to expand to other markets likely will keep watch on the government’s efforts to foster free trade within the region.

In Mozambique, by way of example, the benefits for local firms are significant. While there are no free trade zones, there are distinct free industrial zones enjoying specific tax incentives slightly different to the general incentives already on offer.

For one, a 60% reduction on income tax for a period of 10 years as from the beginning of the investment is followed by a further incentive by way of a rebate on certain transfer duties.

Exemption from customs duties on the importation of building materials, machinery, equipment, accessories and spare parts is also in effect.

If the trends continue across all SADC countries, South African businesses are likely to have an easier time investing their operations into neighbouring nations.

“The key driver for development and deeper integration within the SADC over the next 15 years is market integration, which encompasses financial and capital markets, and intra- and extra-regional trade, which should be supported by sound macro-economic policies,” according to Fudzai Pamacheche, an economist at the SADC Secretariat.

President Zuma’s affirmation of a commitment to SADC’s success will prove a plus for many companies in the long term if he sees through the commitment.

As high communication costs continue to plague business, particularly affecting small, medium and micro enterprises, the president added that to encourage greater economic growth, his Cabinet would be “working to reduce the cost to communicate”.

“The South African public can look forward to an even further reduction of broadband, cellphone, landline and public phone rates,” he explained during his State of the Nation Address.

This action, while not opening up specific direct business opportunities, is set to reduce the operating costs for entrepreneurs and businesses, allowing for improved bottom lines and the opportunity to channel extra savings into more sophisticated improved overhead operations or overall profit.

With over 90% of South Africans possessing access to a mobile phone, the benefits of reduced costs are far-reaching and should not be underestimated.

Garreth Bloor

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