South Africa Power Report Q2 2008

The new South Africa Power Report from BMI forecasts that the country will account for 20.09% of Middle East and Africa (MEA) regional power generation by 2012. BMI's MEA power generation estimate for 2007 is 1,130 terawatt hours (twh), representing an increase of 5.2% over the previous year.

We are forecasting an increase in regional generation to 1,573twh by 2012, representing a rise of 39.3% between 2007 and the end of the period.

Thermal power generation in 2007 is estimated by BMI at 999twh, accounting for 88.4% of the total electricity supplied in the region. Our forecast for 2012 is 1,372twh, implying 37.4% growth that reduces slightly the market share of thermal generation to 87.2% - thanks in part to environmental concerns that should be promoting renewables, hydro-electricity and nuclear generation. South Africa's thermal generation in 2007 was estimated at 249twh, or 24.89% of the regional total. By 2012, the country is expected to account for 21.26% of thermal generation.

For South Africa, coal was in 2006 the dominant fuel, accounting for 78.0% of primary energy demand (PED), followed by oil at 19.3%, and nuclear with a 2.0% share of PED. Regional energy demand is forecast to reach 865.6mn tonnes of oil equivalent (toe) by 2012, representing 27.2% growth over the period since 2007. South Africa's estimated 2007 market share of 18.10% is set to fall to 16.50% by 2012. South Africa's estimated 11.0twh of nuclear demand in 2007 is forecast to reach 16.5twh by 2012, with its share of the Middle East/Africa nuclear market falling from 100% to 67.35% over the period.

South Africa is ranked equal third, alongside Iran, in BMI's newly-revised Power Business Environment rating, thanks largely to its significant market size, low level of energy import dependency and reasonably high proportion of renewables use. The power sector is not yet competitive, with little progress towards privatisation. The regulatory environment remains relatively unattractive. While South Africa is currently keeping company with Iran, it has greater potential to break away and move clear over the medium term.

BMI is forecasting South African real GDP growth averaging 5.62% per annum between 2007 and 2012, with the 2008 forecast at 4.70%. Population is expected to expand from 47.9mn to 50.6mn over the period, with GDP per capita and electricity consumption per capita both forecast to increase significantly.

(by 5.6% and 17.9% respectively). The country's power consumption is expected to increase from an estimated 230twh in 2007 to 286twh by the end of the forecast period, leaving theoretical surplus generation falling from an estimated 33.8twh in 2007 to 29.9twh in 2012, assuming 3.4% annual growth in generating capacity.