Richards Bay Industrial Development Zone: Aiming to become Africa's energy hub

THE Richards Bay Industrial Development Zone (RBIDZ) is poised to attract over R290 billion in project investments, which could transform the area into a significant energy hub supplying power to KwaZulu-Natal and beyond. 

This ambitious vision was articulated by RBIDZ CEO Thabane Zulu during an interview at the Africa Energy Indaba, held last week at Cape Town’s International Convention Centre. This annual conference, now in its 19th year, brings together more than 1 500 industry leaders, policymakers and investors to discuss and shape the future of Africa’s energy sector.

Current investments

Since its establishment in 2002, the RBIDZ has successfully attracted more than R25bn in investments. Zulu said that operations are running smoothly, with strong demand from investors eager to establish industrial and commercial projects. Key investors include Nyanza Light Metals, which is investing in a titanium pigment plant, and Wilmar Processing SA, an edible oils manufacturer.

Social and environmental

During the conference, Zulu participated in a panel discussion titled “Impact Investing in Africa’s Energy Sector: Aligning Financial Returns with Social, Environmental and Governance Goals.” This topic is crucial, as neglecting social and environmental factors in energy investments can lead to social inequity, environmental degradation, community resistance, economic inefficiency and reputational damage.

The delegates highlighted the significant energy infrastructure shortfall in Africa, with 570 million Africans lacking access to power. Moreover, power shortages result in an annual GDP loss of 2% to 4% across the continent, while one billion Africans still rely on biomass for energy. In terms of addressing social and environmental goals within the energy sector, there is a great need for better co-operation among African countries. 

Africa's energy transition

While the global community is moving towards reducing carbon emissions through a renewable energy transition, Africa's primary target remains universal access to power - with hopes to achieve this by 2063. 

South Africa’s Minister of Electricity and Energy, Kgosientho Ramokgopa, informed delegates that new energy projects in Africa now face a “seismic shift” in risk, as global geopolitical tensions have made international project and aid financing increasingly difficult to secure. Recent moves by the US to cut foreign aid have already cost Africa R148.7bn in climate-linked financing.

Aligning for investment

Zulu emphasised that despite the constraints on funding Africa and South Africa’s energy infrastructure, there are ways to make energy projects more appealing to investors. One approach is to better align environmental policies across African countries, including South Africa, with economic and social development goals. He stressed the importance of balancing these imperatives in all energy infrastructure projects - a principle that the RBIDZ applies when assessing its projects.

Gas-to-power initiative

As an example, Zulu cited a proposed 3 000 megawatt Combined Cycle Power Plant gas-to-power project, which was initially proposed by Eskom at the RBIDZ in 2016. This project is one of three gas-to-power initiatives in the RBIDZ’s project pipeline. 

To put this into context, Eskom’s total installed generation capacity is approximately 58 753 megawatts, spanning various types of power plants including coal, nuclear, hydroelectric, wind and solar.

KwaZulu-Natal currently receives electricity via the grid and is the only province without large-scale generation plants or renewable projects. The provincial government has designated Richards Bay as the energy hub for the province – and the Combined Cycle Power Plant is one of a selection of projects that will enable the area to fulfil this critical role.

Commitment to standards

Zulu said that Eskom has conducted a rigorous Environmental Impact Assessment (EIA) for the project, which also passed a stringent environmental stress test carried out by the RBIDZ and involving several environmental specialists.

As an agent of the state, the RBIDZ is committed to ensuring that relevant social and environmental targets are met for all projects in the zone. To support foreign companies investing in the RBIDZ, the organisation has established an enterprise development centre for skills training - ensuring that skills are developed locally rather than imported.

Social impact

The RBIDZ plays a crucial role for its investee companies by facilitating compliance with social, stakeholder and environmental commitments required for investment in the zone. Zulu emphasised the necessity of taking a leadership role in these engagements, stating that projects must also invest to meet emissions compliance requirements and diversify energy sources for long-term sustainability.

He further explained that the RBIDZ measures the social impact of all investments, including job creation, from the outset of each project. If a project fails to meet defined targets, it can be halted before financing even begins.

Future outlook

The Eskom gas-to-power project has, however, faced legal challenges due to complaints from two civil society environmental organisations. Zulu remarked that if the project had proceeded, it could have significantly alleviated the impact of load shedding in recent years. Currently, the project is at its final court hurdle, with its EIA having successfully passed scrutiny through previous court challenges; demonstrating the rigorous standards applied to obtain the EIA.

Expressing concern about the implications of these kinds of additional hurdles to investment, Zulu said that it was unacceptable for a company proposing a project with a major positive economic impact to face prolonged legal challenges - especially when it has met all necessary environmental obligations.

Diversifying funding

The RBIDZ also has two other gas-to-power projects in the pipeline. The first is the 200-megawatt Phakwe Richards Bay Gas Power Plant, which is in the pre-construction phase with an approved EIA. The other project is being developed by the Centre for Environmental Rights (CER).

Zulu pointed out that African countries contribute only about 3% of global carbon emissions; and they face disproportionate challenges in sustainable funding. In light of geopolitical challenges affecting global energy financing, African nations must collaborate to review their energy development strategies.

During the panel discussion, it was highlighted that South Africa’s energy infrastructure, like that of Africa’s, will require substantial private sector funding. However, international funders have often imposed ownership conditions that do not align with local needs.

Conclusion

In conclusion, the conference underscored the urgent need for Africa to diversify its funding sources for energy projects, including partnerships with China, the BRICS countries (Brazil, Russia, India, China and South Africa), the European Union, and the private sector. Aggressive policy reforms are necessary to de-risk energy investments across the continent, as public finance alone will not suffice to bridge the energy infrastructure investment gap.

Ayanda Noah, general manager of the state-owned energy company CEF, stated that South Africa currently imports more than 60% of its liquid fuel requirements. This makes it crucial to revive the Sapref and Mossgas refineries, which are currently closed, to enhance energy security.

Eskom's chief financial officer, Calib Cassim, revealed that the utility spends about R45bn annually on capital expenditure, with R30bn allocated to maintenance. However, Eskom will require additional funding to expand its grid distribution capacity and unlock renewable energy projects in the Western Cape, Eastern Cape and Northern Cape.

Zulu concluded that any investment in energy infrastructure must begin with measuring its social and environmental impacts, with continuous monitoring throughout the project's lifecycle.