Special Feature: Accounting for darkness (Part Four)

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SA CFOs reveal the impact the country’s power crisis is having on people, business, and the economy.

CFOs around the country are concerned about ongoing rolling blackouts that, according to Eskom’s now-former CEO Andre de Ruyter, will likely be around for a while. The grid’s failure is badly affecting productivity, especially at heavy industries, and resulting in the need for massive investments, which are eating into cash flow reserves.

During his State of the Nation address on 9 February, president Cyril Ramaphosa declared the power issue a national state of disaster and shortly thereafter appointed Kgosientsho Ramokgopa as Minister of Energy. Ramokgopa has since said that South Africans should be patient with the power crisis plaguing the country. Measures to right the situation are urgently required, as the economy is losing as much as R900 million every day when stage 6 is in effect, according to the South African Reserve Bank.

Despite the impact loadshedding has on business and consumers that was highlighted in parts one and two of this special feature, in part three CFOs agreed that several actions need to be taken in order for the country to move forward.

To get around the rolling blackout obstacle, companies are turning to wind and sun to provide power. This also fits in with the United Nations’ Net-Zero goal that aims to see the use of fossil fuels eliminated by 2050.

Sasol is one company shifting from dirty sources of energy, having signed three wind-power purchase deals with Enel Green Power, an Enel Group subsidiary. This deal will see Sasol incorporating 220 MW of renewable energy, which will provide 800MW a year, at its Secunda site, where Air Liquide operates the world’s largest oxygen production facility. In total, Sasol is aiming for 900MW of clean energy.

Hanré Rossouw, Sasol CFO, explains that the company is shifting away from fossil fuels, embracing new forms of energy, and, in August 2020, committed to reduce its absolute greenhouse gas (GHG) emissions from the South African operations by at least 10 percent by 2030, off a 2017 baseline.  As part of the company’s energy strategy, Sasol has an ambition to lead the energy transition in South Africa. The energy transition is focussed on decarbonisation, preservation and growing new value pools.

“Our decarbonisation agenda is positioning us to deliver sustainable value into the future. We are undertaking renewables at scale while growing new value pools such as green hydrogen, ensuring competitive and sustainable returns,” he says.

In mining, too, there is a shift. Implats CFO Meroonisha Kerber says the platinum mining company has concluded studies for behind-the-meter solar power plants at its Marula and Rustenburg operations in South Africa. Implats has issued market inquiries for wheeling renewable energy supply to its South African operations and further market inquiries for gas-to-power and heat solutions at our Refineries operations, to displace coal use. “These initiatives are among those aimed at achieving our 2030 goal to reduce our carbon footprint by 30 percent and further progress against our ambition of attaining carbon neutrality in 2050.”

Other sectors, too, have embraced alternative power sources.

FCTG SA CFO Averen Deonanan says the company has been able to overcome some of the challenges with early decisions like installing invertor systems in its stores, remaining flexible in the way it works and procuring an extremely large range of diverse products to meet the needs of its customers.

The Foschini Group has proactively spent R200 million in 2023, says CFO Bongiwe Ntuli. This comes “ahead of severe load shedding”. It also installed Tesla Power walls in our high turnover stores to protect trade (about 1,000 stores out of just over 3,000 stores have the backup power). Payback has been unbelievable and protects 60 to 70 percent of our South African revenue.”

Dawid Swart, former CFO of Wetility, says the cost of installing renewable energy, such as solar and wind, has come down significantly over the past decade. “These two sources are becoming more competitive than traditional sources of energy.”

According to the International Renewable Energy Agency (IRENA), the cost of utility-scale solar PV in South Africa has decreased by 68 percent between 2010 and 2020, while the cost of onshore wind has reduced by 54 percent during the same period, Dawid says.

IT company EOH is looking at covering its roofs with solar, just like Mustek did many years ago. Megan Pydigadu, group FD, adds that it is talking to its landlords about introducing clean energy at its offices to reduce our dependence on generators and manage the cost of running generators. “We are looking at putting solar on our office roofs and storing a base load through batteries. We run data centres for our customers that need up time 24 hours per day, seven days a week, so it’s critical we have multiple backup options to ensure uninterrupted power supply.”

Omnia is also moving green. CFO Stephan Serfontein says it is on track to achieve its 2027 aims, which includes a 12 percent increase in renewable energy consumption, and a 20 percent reduction in greenhouse emissions.

However, the cost-effectiveness of renewable energy for companies in South Africa depends on several factors such as the type of renewable energy, the cost of renewable energy technologies, the size and location of the company or a specific project, the prevailing electricity prices as well as government policies, and legislation, he adds. Companies need to look at the cost implication, over the short- and long-term, as it will initially affect capital and cash flow, but lead to lower electricity costs, Dawid adds.

This article was originally published in the first edition of the 2023 CFO South Africa Magazine. Read it here.

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