The signing of an electricity supply treaty between the governments of South Africa and the Democratic Republic of the Congo signals that extremely ambitious Grand Inga project can finally get off the ground.
Hopefully, it also leads to a change in mindset within Cabinet to move away from the fixation to control virtually all electricity generation.
Surprisingly, the ceremonial signing of the treaty was a low-key affair. The treaty has been approved by Cabinet but not yet ratified by the two presidents. It commits South Africa to buy the first 2 500 MW of electricity generated by Inga 3, the third development in the Inga Grand project. It also gives South Africa the right of first refusal on electricity produced by the other Inga phases.
The Grand Inga project will be developed via public private partnerships and managed by private entities once constructed. This begs the question why government is not applying the same principles to the local market and buying electricity from the private sector.
Very ambitious project
The Inga project is really an interesting one that captures the imagination. It is one of those massive projects that could well define future infrastructure projects on the continent. It will also increase regional integration and cooperation, which would also boost economic activity.
Plans for the Inga project have been on the cards since the 1950s. The late Mobutu Sese Seko cut the ribbons of Inga 1 and Inga 2 phases in 1972 and 1982 respectively. Unfortunately, these projects have fallen in disrepair, and today only a few generators are still running.
Inga 3 is therefore critical for the overall Grand Inga project. It will show that the project is perceived as viable. It will be the first phase of one of the world’s biggest construction projects and will be closely watched by stakeholders around the world. In many ways, Inga 3’s success or failure will influence decisions on whether we will ever see an Inga 4 to Inga 7.
If completed, it will generate around 44 000 MW of electricity. It will be much more than seven dams generating a lot of electricity. It will be the beacon of development on the African continent and improve regional collaboration.
However, a lot of water will still flow down the Congo before this happens.
Although the project has not officially been launched, expectations are that the total cost of Inga 3 could range from $8 billion to $12 billion (R90 billion to R130 billion). Inga 3 will generate around 4 800 MW of electricity.
This compares pretty well with our own Medupi project. The official cost estimate of Medupi, which would also generate around 4 800 MW, is R105 billion. Unofficial estimates put the total cost of the power station as high as R145 billion.
The project cost of Inga 3 is however not too significant if seen in context of cost estimates in excess of $100 billion for the whole Grand Inga project. The actual number could however be much higher.
The project will be financed by the private sector, so it will be interesting to see whether it is deemed viable, and if the project can be completed within budget. Recent examples such as Kusile and Medupi, as well as the Three Gorges Dam may put a damper on private sector enthusiasm.
Three Gorges Dam
The Grand Inga development will follow in the footsteps of the Chinese Three Gorges Dam. The Chinese started construction in 1994 and the dam wall was completed in 2006. The last of the hydro turbines was commissioned in 2012 and it now generates 22 500 MW of electricity. It was in fact the largest construction project in China after the Great Wall.
The construction was however not a fairy tale. This project was recently labeled one of the top ten construction projects in the world that suffered the biggest budget overruns.
The initial budget mooted in 1992 was around $8.35 billion. The Chinese government says the final invoice was $37 billion, but some analysts estimate the total cost could be as high as $59 billion.
I support government’s decision to become involved. It is actually a no-brainer, if the South African government has not committed to significant financial assistance. I also hope that this decision may influence the thinking within government to also consider similar agreements with the private sector in South Africa.
Eskom currently does not buy baseload electricity from industrial companies that generate their own electricity. It does buy from private power producers, but this is limited to fairly small quantities of renewable energy and excess energy from industries in terms of short- and medium-term contracts. This needs to be replicated with regard to baseload energy.
Some lessons have surely been learnt from the power supply to South Africa from Cahora Bassa in Mozambique. In the recent past the supply has been interrupted more than once due to transmission problems, including flood damage to transmission lines. Nevertheless the 1 500 MW from that source has been extremely valuable in the effort to keep the lights on.
Hopefully a renewed perspective would also soften the views on privatisation. After the cost overruns and delays at Kusile and Medupi, government may even be forced to change its strategy to find a long-term and sustainable solution to South Africa’s electricity problems. Eskom has made some positive noises about this, but hopefully the private sector involvement at Inga may be another piece of straw.