Accountants can be key players in the drive to secure the affordable, reliable, and sustainable energy that is desperately needed in the country.
South Africa’s persistent blackouts demand that we mobilise all available resources and incentives to boost energy security. To win, we have no option but to throw the kitchen sink at the energy crisis, which has now burdened Africa’s most industrialised economy for more than a decade.
Businesses and homes are desperate for quick solutions. To win, our response must be urgent and creative, as doing so could prevent any further losses and revive growth. It was therefore somewhat reassuring that Finance Minister Enoch Godongwana in his budget speech in February announced measures to encourage businesses and individuals to invest in renewable energy and boost electricity supply.
There is no doubt that the quickest way to end the rolling blackouts is to roll out the red carpet for private players, households and businesses alike, and make it easier for them to enter the market and access the grid. Moreover, public-private partnerships will be crucial to secure a sustainable energy future.
Professionals have a crucial role to play
It will also become increasingly important for professionals such as accountants to step up and play a leading role in the journey to a more secure and sustainable energy system.
Accounting plays a pivotal role in any modern economy, equipping businesses with vital information for decision-making and growth. In the quest for an affordable, reliable, and sustainable power supply to fuel economic growth, accountants are key players. They can provide much-needed financial analysis, reports, and advice to demonstrate the social impact and potential long-term financial gains of investing in renewable energy. Such investments can result in lower energy costs and reduced carbon emissions, which could encourage more businesses and organisations to invest in solar panels, wind turbines, and other clean energy technologies, thereby turbocharging the adoption of renewable energy.
Renewables are also increasingly becoming cheaper amid technological advances. This bodes well for accelerating investment in new energy. In a recent research report, GreenCape, a Cape Town-based non-profit organisation that aims to drive the adoption of economically viable green economy solutions, highlighted that investing in solar PV makes sense right now, largely because of declining costs. Mass production of PV panels has driven manufacturing costs down at least 80% since 2010, and progress in inverter and ancillary component technology has had a further cost reduction effect. Reduced perceived risk on PV development allows for cheaper project finance. This trend is expected to continue in the coming years.
Accountants can help accelerate this by driving sustainability reporting and disclosure, which can help to build trust and fuel the widespread adoption of sustainable energy practices. With various corporate scandals and corruption allegations plaguing the country in recent years, transparency and accountability has become even more vital.
Furthermore, accountants can play a role in auditing energy usage, pinpoint inefficiencies, and provide detailed analysis of where energy usage can be reduced. This information can lead to the creation of strategies that eliminate energy waste and optimise consumption.
Boost Eskom
It goes without saying that without a well-functioning power utility, we will fall short of our goals to secure a sustainable energy future. We need accountants more than ever to help with the management of Eskom. This could even be on a pro-bono basis for the greater good of the country. Accountants are skilled in financial management and can help a company improve its revenue collection processes, reduce inefficiencies, and comply with regulatory requirements. This can include introducing budgeting systems that place an emphasis on the allocation of resources to essential areas, such as maintenance of power plants and infrastructure development; and developing revenue collection plans that can encourage timely payment by customers and cut the level of outstanding debt. Having such systems could help improve cash flow and enable the power utility to meet its obligations.
Eskom, grappling with high debt and a low credit rating, could benefit from a vast pool of accounting expertise to call on. By improving its finances and operational efficiency, the utility can bolster its ability to provide reliable power supply.
Looking ahead
Broadly, the government will need to work closely with the private sector to tackle the energy crunch.
The Western Cape government and many municipalities in the province have shown the way on that front in recent times. Cape Town, for example, recently introduced solutions to make it more attractive for businesses and residents to go off grid, offering to pay cash for power fed into the local electricity grid. This should help stabilise local power supply, which will boost business confidence and attract more investment into the region.
The private sector, and banks in particular, should also be playing a far bigger leadership role in rolling out innovative and generous financing options to encourage the uptake of renewables and boost power supplies. In an opinion piece published in Business Day in March, Seriti Resources CEO Mike Teke and Seriti Green CEO Peter Venn correctly argued that commercial banks can assist by allowing bondholders to draw an additional amount on their home loans to finance the installation of rooftop solar and battery storage in their homes.
At present, some of the financing options widely available, especially to businesses, include debt finance in which banks offer loans for solar PV installations for five to ten years and monthly payments are a fixed fee. The collateral requirement for the debt funding is often taken against the underlying property or the system (the asset).
Another option, as highlighted by GreenCape, is the lease agreement or ‘rent-to-own’. Here, the installation, maintenance and management of the solar panel and its components are paid for by the solar PV provider, while the business pays a fixed monthly lease payment for the duration of the lease term. The fixed monthly payment is determined based on the estimated annual production of the solar system and not on the solar energy produced or consumed.
This scheme is one of the options favoured by the agriculture sector in particular, which is one of the sectors hardest hit by the energy crisis, thus threatening South Africa’s food security.
South Africa urgently needs to mobilise all resources and instruments to end the crippling blackouts, boost business confidence, and grow the economy. This requires collaboration between the three spheres of government and private players across the country. In the Western Cape, Wesgro (the trade and investment promotion agency for the city of Cape Town and the province), GreenCape, and local and provincial authorities are working in concert with the private sector to create innovative energy solutions. The building blocks are already there, and with the right approach and mindset we can make this work.
Parts of this article were first published in Business Day.
Author
Wrenelle Stander, Chief Executive Officer at Wesgro
