South Africa Energy Efficiency Workshop

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Government and business partners, experts and stakeholders:

The United States Agency for International Development (USAID) is glad to be a co-sponsor of this important workshop and to support on-going efforts to improve energy efficiency in South Africa, particularly in the SME sector.

USAID South Africa bilateral and Southern Africa regional energy partnerships are shaped by knowledge that: The single largest infrastructure impediment to economic growth in the region is inadequate access to energy. For instance:

Jeffrey Humber, Director of the USAID Africa Infrastructure Program, estimates that firms lose 40% in productivity and 20% in annual sales due to lack of adequate and reliable access to electricity; and

According to Ponatshego Kedikilwe, Botswana Minister of Minerals, Energy and Water Resources: only about 30% of the Southern Africa Development Community population has access to electricity, compared to the world average of 70%.

In the region, energy consumption is heavily dominated by biomass which, while much cleaner than fossil fuels, can contribute to global warming by ‘carbon leakage’.

No country in the world has developed its economy without abundant and affordable energy supplies. According to the International Energy Agency’s (IEA) 2009 World Energy Outlook report, world primary energy demand is projected to increase by 40 percent by 2030, with developing countries as the main source of demand. Worldwide, fossil fuels account for more than 75 percent of the overall projected increase in energy use.

Without substantial changes in energy policies, continued heavy reliance on fossil fuels will result in growing levels of greenhouse gas (GHG) emissions over coming years. Climate change is expected to alter crop growing conditions in some of the most food-insecure countries of the world. Livelihoods of subsistence agriculture and herding are especially climate sensitive.

USAID’s Administrator, Dr. Rajiv Shah, joined President Obama last weekend at the Camp David summit, devoted to strengthening food security in Africa through a new partnership that brings together African countries, private sector players, civil society stakeholders and G8 partners.

Alongside African heads of state and corporate CEOs, the President described how the New Alliance for Food Security and Nutrition would unlock private investment that could help fight hunger and malnutrition in Sub-Saharan Africa.

USAID is helping to establish a local environment that will flourish with such support for the most effective practices of growing food amidst challenging conditions. Climate change is a cornerstone of the U.S. Government’s “Feed the Future (FTF)” Initiative.

Through our Office of Foreign Disaster Assistance, USAID promotes conservation agriculture that enhances household and national food security through sound and sustainable farming practices in Southern Africa.

What else is USAID contributing in this part of the world? The USAID Southern Africa Trade Hub is collaborating with the Regional Electricity Regulation Association (RERA) to help build institutional and human resource capacity of regulatory agencies in the region and to promote the introduction of clean energy generation and transmission resources.

The USAID Africa Infrastructure Program (AIP) is also providing transaction advisory services to Southern African governments, agencies and project developers to reach financial closure on clean energy projects (such as hydro, wind, solar, geothermal and some biomass).

USAID is also partnering with the South African Government to Enhance Capacity for Low-Emissions. This is part of a broader U.S. Government approach to support countries’ pursuit of long-term, transformative development. We seek to accelerate sustainable, climate-resilient economic growth while slowing the growth of greenhouse gas emissions.

Look at the South African market, a key regional economic stakeholder and partner. Access to affordable and reliable energy services is a prerequisite for economic development, especially as energy costs continue to rise.

SMEs, especially those for whom energy expenses represent a large portion of total production costs, can reap high direct economic benefits by improved efficiency of energy usage and reduced energy wastage, yet numerous barriers and market failures have prevented widespread adoption of energy management best practices.

South Africa’s SME sector has fallen behind larger industry benchmarks in terms of productivity, technology upgrading and energy efficiency. These businesses experience high and rising energy costs, while facing increased global competition. We can see that cost pressures directly influence SMEs’ economic viability and growth.

SMEs already face challenges in accessing the funding they need to grow. They will likewise need capital to make investments in more efficient equipment and in process improvements that reduce operating costs and increase their competitiveness.

Given the favorable conditions for the expansion of energy efficiency in South Africa, the USAID Financial Sector Program is working with financial institution partners to explore new products and services that would stimulate the market for Energy Services Companies (ECSOs) and other small and medium sized businesses that are active in the energy efficiency space.

As part of this effort the USAID Financial Sector Program recently completed a study to determine the market opportunities for energy efficiency finance for SMEs in South Africa, and the findings of this study will be presented later today.

We hope that this work together with the other initiatives presented today will set the stage for the development of sustainable market- driven financing solutions for SMEs seeking to cut their energy usage and expenditures.

Moreover, by reducing energy usage through smart, cost effective investments, we can support the development of SMEs which are creating a significant and growing number of new jobs, stimulating entrepreneurship and generating positive economic growth.

Thank you.