South Africa Considers Building Nuclear, Coal-Fired Power Plants

Location: South Africa

Feb. 22 (Bloomberg) -- South Africa is considering spending more than 600 billion rand ($78 billion) on new nuclear plants, another coal-fired plant and a hydropower project in the Democratic Republic of Congo to stave off power shortages in Africa’s largest economy.

In the 2012 budget released today, the National Treasury allocated 844.5 billion rand toward new energy, transport, housing, telecommunications and water projects in the three years through March 2015. The budget lists 43 infrastructure programs worth a total of 3.2 trillion rand that are in progress or under consideration for implementation by 2020.

“No good project will be short of funding,” Finance Minister Pravin Gordhan told lawmakers in his budget speech in Cape Town. “South Africa has deep and liquid capital markets through which long-term capital can be raised at competitive rates.”

President Jacob Zuma announced plans for a “massive” infrastructure drive in his Feb. 9 state-of-the-nation speech to help spur invest and support growth in Africa’s biggest economy.

Proposals to spend 300 billion rand on nuclear plants with the capacity to generate 9,600 megawatts of energy by 2029 are in the “final stages of consideration,” the Treasury said. The government may also build a new 111 billion rand new coal-fired plant, in addition to the Medupi and Kusile plants under construction.

Grand Inga

An investment of 200 billion rand in Congo’s 40,000 megawatt Grand Inga hydropower project is at the “assessment stage,” while a study into a 200 billion-rand solar park is due for completion this year.

Transport projects being considered include a 37 billion- rand upgrade of Transnet SOC Ltd.’s rail line transporting coal from the eastern Mpumalanga province to the port of Richards Bay. A 300 billion-rand high-speed rail line between Johannesburg and the eastern port of Durban is still at a conceptual stage, the Treasury said.

The government is also considering a proposal for state petroleum company, PetroSA, to build a 200 billion-rand, 360,000 barrel-per-day refinery at the eastern port of Coega.

Public-sector borrowing will start “rapidly rising” after 2015 as infrastructure investment accelerates, Gordhan said.

The government has been struggling to implement capital projects, spending just 68 percent of the 260 billion rand allocated in the year through March 2011, Gordhan said.

Selling State Assets

“In addition to long delays, we have often experienced significant cost overruns,” he said. “We shall step up the quality of planning, costing and project management so that infrastructure is delivered on time and on budget.”

The government is reviewing its investment in a number of state-owned companies and may sell non-priority assets, the Treasury said.

New regulators may also be established to oversee the water and transport industries, to ensure the services they provide are correctly priced, while the Department of Energy is reviewing of its power-pricing policy, it said.

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