South Africa’s Climate Transition Dilemma

⚡ Five Second Summary:

South Africa is seeking alternative funding avenues for climate-proofing infrastructure citing high costs and low fiscal capacity to bring new projects online. 

Organisations like the European Investment Bank are increasingly being looked to by the South African government to bridge the energy transition funding gap. 

📊 The Chart

South Africa Current Account Balance, 1960 – 2023 | CEIC Data

🤔 What's Happening:

• South Africa's cash-strapped government struggles to finance climate-resilient infrastructure.

• South Africa faces rising climate-related disasters, like flooding in KwaZulu-Natal.

• High debt levels hinder climate investments, a common issue in African nations.

• Previously, the European Investment Bank committed €1 billion to support South Africa's shift away from coal dependency (Source).

• This is part of a growing theme of Western investment in Africa, in part to curb the influence of China on the continent.

🔢 Numbers + Facts:

• The South African government believes US$190BN in investment is needed annually for the clean energy transition. 

• The European Union has just pledged another €2M for economic programs, including infrastructure across Southern Africa. 

🔮 Looking Ahead:

• In the short-term, more than 10,000MW of coal fire-powered energy is retiring in South Africa - which is ~20% of the country's total energy supply.

• Natural gas looms as a key input in South Africa’s energy transition

• Delays in financing and developing energy transition infrastructure could mean South Africa has to rely further on transitional fuels like gas to meet demand in the medium term. 

📈 The Company: Invictus Energy (ASX: IVZ)

Market Cap: $112.39M | Share Price: $0.082 | Industry: Oil & Gas

Invictus Energy (ASX: IVZ) is looking to develop its 80% owned oil and gas project in Zimbabwe, Africa. 

How does IVZ fit into the story?

IVZ’s project is strategically located in Zimbabwe which borders Africa’s third largest economy, South Africa.

South Africa and other regional neighbours are shutting down coal generators and will need to invest in transition energy fuel sources while energy transition infrastructure is developed. 

High costs and delays in developing climate-resistant infrastructure projects could mean demand for transitional fuel sources like gas increases in the medium term. 

IVZ recently declared a discovery at its oil and gas project in Zimbabwe. 

If IVZ successfully flow tests and shows that its project can be commercialised it could offer a solution to South Africa’s energy crisis in the medium term

📰 Mainstream Media Coverage