Monde Bala, CEO of the National Transmission Company South Africa (NTCSA), admits there’s deep concern about how little has been done to extend the country’s transmission capacity.
“There is a huge sense of panic. In the past decade and a half, with all the investment that went into the generation space, very little investment went into the transmission space,” he tells the FM.
Less than a year ago, Eskom’s former group executive for distribution was put in charge of building 14,500km of new transmission lines with 271 transformers, substations and other related grid infrastructure by 2034, to connect the 56GW of mostly renewable energy that the 2025 Integrated Resource Plan says the country will need by then.
Given that Eskom could only build 74km of new transmission lines in 2023/2024, how feasible is this?
South Africa’s entire transmission system of 33,000km was built over a century, Bala says. “So essentially in the next eight years we must build half of that.”
Over the past two years the utility has built less than 500km, a rate it will have to accelerate by seven to 10 times to meet the 2034 target.
“To give ourselves a fighting chance to get to 14,500km we’re trying to align our supply chain. With so little investment in the transmission space, many of the skills we had we’ve lost. Effectively we’re down to five credible contractors. That number will have to be doubled or tripled in the next year or year and a half.”
Localisation
Local industry is concerned that with such a tight deadline it will be excluded in favour of more experienced, skilled and capacitated Chinese contractors.
“The concern is valid,” says Bala. “We need to ensure that we accelerate execution of the work, but in doing so we need to ensure that we localise as much of it as possible.”
The intention is to give local companies “an adequate chance” to participate in this R440bn build programme. “Our view is that if we miss this opportunity to localise and industrialise South Africa, it will be a huge loss for the country. We are very mindful of that.”
As it is, industry associations have objected to the request for proposal issued by the independent power producers (IPP) office because the selection criteria exclude local engineering, procurement and construction contractors on the grounds that they lack the experience and capacity.
Bala says the IPP programme is designed to accelerate the execution of the 14,500km.
“We’re aware of those concerns they have raised with us. We’ve relayed them to the IPP office. From our side, the bulk of the 14,500km we are executing mainly through local contractors. They will, however, have to be supplemented somewhat.”
Bala and electricity & energy minister Kgosientsho Ramokgopa told Chinese companies at a recent electricity and energy investment conference in Beijing that “we need you” because South Africa doesn’t have the required industrial capacity or experience.
So what does Bala mean by “somewhat”?
“For us to be able to deliver on this programme, we’re going to have to have strategic collaborations. But we need to ensure that the local content of those collaborations benefits our contractors and suppliers,” he says.
Has the department been slow to appreciate what a game-changer the transmission build programme can be in terms of job creation and economic growth?
“I wouldn’t say they were particularly slow. What we’re going through is quite a complex period wherein the energy space is transforming, and our policy needs to catch up with the transformation that has already taken place.”
Does he agree with the minister that we don’t have the industrial and engineering capacity to handle the transmission build project, and will need to import most of it from Chinese and other international contractors?
“I do agree that at a value-chain level we have not built up capacity. And it will require a significant effort to build up that capacity to the extent that we need to execute the transmission build programme.
“How we build up that capacity is the subject of the conversation we’re currently having with potential people we want to collaborate with, including local steel and power-line associations and the manufacturing sector. We’re in conversation with all of those people, and with the Industrial Development Corporation, to say how do we accelerate the incubation of our local contractors so that they may take part in this programme.”
A two-year window
One of the complaints is that there’s no understanding of local industry’s capabilities and capacity to ramp up.
“We do understand the capacity we have locally, we’ve done work with these associations,” says Bala. “But it’s one thing to be able to construct a line, it’s something else to sort out the necessary supply chain.”
They say there is more than enough supply across the local value chain from upstream all the way down?
“We’ve given ourselves two years to establish a competent delivery mechanism. Suppliers have indicated that what they require from us is transparency in terms of projected demand so that then they can scale themselves up for that.”
Industry associations say that for five years they’ve been asking for a sense of what would be needed so they could start ramping up.
Bala concedes that the response has been too slow.
“I agree absolutely with that. We have not been able to give that local view. We do now have what we believe to be a credible projection in terms of what will be the demand in the coming years. This is the part we are now discussing with them, to say, this is what’s coming, gear yourselves up.”
Another concern is that the transmission build project will be less about building local industrial capacity than enriching BEE intermediaries.
“I really can’t comment on that, save to say that the procurement process is quite clear in terms of the requirements we need to adhere to,” says Bala.
Local industry associations say the request for pre-qualification leaves the way open for tenderpreneurs by requiring that successful bidders hold 49% local equity, but don’t need manufacturing, construction or engineering capacity or experience.
“That is in relation to phase one of the independent transmission projects [ITP] programme. What we understand is that in the future phases of the ITP programme those things will be addressed. We acknowledge that it does have these shortcomings.”
The transmission system operator will be in place by December 2029. Meanwhile, if not for longer, the NTCSA will operate as an Eskom subsidiary.
Can there be a fully competitive wholesale energy market if the company is part of Eskom?
“We’re in the throes of setting up the wholesale energy market. Part of the incubation period for that is to make sure that there are sufficient arm’s-length arrangements with a Chinese wall. But at the heart of it we need the regulator to really play its part in ensuring that the NTCSA operates within an acceptable level of independence so that it can keep confidence in the market.
“If there’s a semblance of preferential treatment, I’ve got no doubt that the players in the market will take us on.”
The ‘gas cliff’
Another major concern is the looming “gas cliff”, when supplies of natural gas from Mozambique finally run out in 2030. Alternative sources will require infrastructure that doesn’t yet exist.
“If gas does not come on time, we will have serious issues with the system. We need gas to back up variable renewable energy [projects] and maintain grid stability.”
He is extremely concerned that so little work has been done to build liquefied natural gas infrastructure.
“We’re trying to get that accelerated. If we go over the gas cliff we will go back to load-shedding. That is our biggest fear. So those who must make things happen must do so quickly.”
What if the 2034 target is not achieved?
“This transmission infrastructure is at the centre of electricity supply for the country. We’re resolute that we have to make the 14,500km by 2034. We need to demonstrate that we can actually, as a country, move beyond just planning to execution.”
He says the bulk of the experts he’ll be relying on are people “who have long tenure in the transmission space in Eskom”.
Given Eskom’s culture of nonexecution is that a concern?
“We need to create an environment wherein they can get on with their jobs. We need to define the culture of the new organisation as well.”
