Cape Town’s R2.8 billion nail in the coffin for load shedding

The City of Cape Town has secured R2.8 billion in funding to invest in its electricity grid—part of a three-year infrastructure plan to beef up its defences against national grid failures.

The city plans to spend almost R40 billion on infrastructure projects between 2024 and 2027, including R4 billion on electricity grid upgrades and maintenance.

The R4 billion infrastructure programme aims to strengthen and expand the electricity grid and ensure its capacity to harness new energy sources, including renewables.

It has now signed an agreement with the German Development Bank, KfW, on behalf of the German Government, to fund R2.8 billion worth of upgrades.

The funding is a concessional finance agreement which will give the city favourable financial terms for long-term affordability.

Cape Town mayor Geordin Hill-Lewis said that the funding is critical, because without reliable infrastructure, the metro would not be able to “beat power outages”.

He said the city needs to diversify its power supply and also ensure there is enough room for the city to grow—which is it already doing at a rapid pace.

The financing will also boost job creation through the projects it will enable, with the city aiming to create 130,000 construction-related jobs over three years.

While the city aims to spend R40 billion over three years, its 10-year infrastructure plan sees this escalating to R120 billion.

“The KfW’s concessional loan—over a period of 15 years—will help the city invest sustainably in infrastructure with long operational lifespans,” the city said.

Cape Town’s investment plans are placed against the backdrop of the threat of continued load shedding in South Africa.

While national power utility Eskom has staged a significant turnaround in energy availability over the past year, load shedding as high as stage 6 is still a very real possibility in the country.

This was demonstrated a week ago when stage 3 load shedding rapidly escalated to stage 6 as more units at key power stations went down.

Economists and analysts have warned that while the grid has become more reliable, capacity has not fundamentally changed.

In other words, Eskom has been working to get its existing capacity to operate at expected levels—not expanding the grid or building new capacity to facilitate actual growth.

The Bureau for Economic Research recently pointed out that South Africa’s grid capacity constraints have effectively capped South Africa’s GDP growth, as any move to expand business operations or push for growth will be met with a power grid that cannot support it.

If South Africa pursues the growth it needs to create jobs and boost production, load shedding will invariably return because there is simply not enough capacity to support it.

This reality has forced businesses and capable metros to seek alternatives to Eskom power.

As Cape Town pursues its own infrastructure projects to bid load shedding farewell, other major cities like the City of Johannesburg and the City of Tshwane have also put these investments on their roadmaps.

A crucial difference, however, is that the latter municipalities are struggling with their own infrastructure problems, not having enough money to fix their ailing networks and pay the billions owed to Eskom.

Cape Town already stands out from other metros in the country through its alternative energy sources which allow it to reduce the stages of load shedding relative to the national schedules.