Industry Trend Analysis - Energy Policy Uncertainty To Cloud Investment Environment - DEC 2017

BMI View: Continued mixed messages regarding the country ' s nuclear agenda and the prolonged uncertainty in South Africa ' s renewables sector will weigh on investor sentiment across the South African power sector. Coal will still remain the dominant fuel in the power mix, despite diversification efforts, accounting for just under 90% of total electricity generation.

We expect coal will remain the primary fuel source in South Africa's power generation mix over the coming decade, forecast to account for nearly 90% of total electricity generation by the end of our 10-year forecast period in 2026. This is despite ongoing efforts by the government and the state-utility, Eskom, to diversify the power mix towards other fuels such as nuclear, gas and renewable energy.

In fact, we note that these diversification efforts are being undermined by continued mixed messages from the government regarding the country's nuclear agenda and prolonged policy uncertainty with South Africa's renewables regulatory framework - the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Furthermore, the latest cabinet reshuffle on October 17, which saw a new Energy Minister appointed - the third in less than a year - has done little to reduce policy uncertainty in the country's energy sector ( see ' Cabinet Reshuffle Will Further Undermine ANC Cohesiveness ' , October 19). We believe these factors will weigh on investor sentiment across the country's power sector.

Coal To Remain Dominant Fuel Type
South Africa - Electricity Generation By Type (TWh)
e/f = BMI estimate/forecast. Source: EIA, BMI

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