Electricity and Energy Minister Dr Kgosientsho Rampkgopa has indicated that South Africa should be willing to pay a premium to ensure that the multibillion-rand expansion of the electricity grid is used to leverage industrialisation and transformation.

“We must be very decisive. We are prepared to pay the price and the premium for growing the South African economy … I know industry is ready,” Ramokgopa said, during an engagement with manufacturing and construction stakeholders in Sandton on October 31.

The gathering was convened after various industry bodies expressed concern about both the pace and shape of the National Transmission Company South Africa’s (NTCSA’s) investment programme and alarm at the technical and financial criteria being used to select private grid developers under the Independent Transmission Project (ITP) programme.

In a letter to the Independent Power Producer Office, which is overseeing the first phase of the ITP procurement, the Powerline and Substation Association, the Steel and Engineering Industries Federation of Southern Africa and the Manufacturing Circle described criteria used in the request for qualification (RFQ) as onerous, and also not enabling of participation by local industry.

Ramokgopa acknowledged the concerns and said that it would seek to remedy some of the issues in the request for proposals (RFP) for the first ITP procurement phase, to which 1 164 km of powerlines and 2 630 MVA of transformation capacity across seven corridors had been allocated.

The Department of Electricity and Energy indicated that pre-qualified bidders from the 17 consortia that had responded to the RFQ would be made by December 15, when a draft RFP would also be released.

The prequalified bidders would then be given time to comment on the draft ahead of the release of the formal RFP, which would be issued “by no later than quarter three of the 2026 calendar year”.

This represented a significant delay from the original schedule, with the RFP initially signalled for release before the end of 2025.

The department said the extension was needed to ensure alignment with the establishment of a Credit Guarantee Vehicle, which was being developed by the National Treasury with the support of the World Bank Group.

RFP TO STIPULATE LOCAL-CONTENT

However, it also promised that the RFP would stipulate local-content requirements “concomitant to the local industry’s capacity” and that space would be created for qualified local engineering, procurement and construction (EPC) contractors to participate in project delivery. An issue that had been in doubt in light of the criteria outlined for EPC contractors in the RFQ, which appeared to stipulate prior ITP-type experience.

Ramokgopa acknowledged that all the localisation issues raised by industry might not be resolved ahead of the first bidding round but promised that these would be remedied during subsequent rounds and that localisation stipulations would rise progressively.

He also underlined the industrialisation opportunity presented by both the ITP programme and the NTCSA’s own investment programme, which he said would depend largely on predictable and consistent demand that addressed the “cancer of starting and stopping” procurement.

Under the Transmission Development Plan (TDP), the NTCSA and ITP developers are expected to construct 14 500 km of new powerlines and 133 000 MVA of additional transformers by 2034 at an estimated cost of about R440-billion.

TDP FROZEN TO ALLOW FOR IRP ALIGNMENT

The TDP provides a ten-year forward-looking view of the grid investments being planned and it was confirmed that the 2024 version had been “frozen” until 2027. A move enabled through an exemption received from the regulator and justified by the NTCSA on the basis that it needed time to align the plan with the recently Gazetted Integrated Resource Plan 2025.

The TDP is currently back-end loaded, with relatively low levels of grid expansion in the first five years, accelerating dramatically in the second five-year period.

This investment profile continued to cause consternation within the local supply community, which argues that it starves them of the upfront orders needed to make the manufacturing and skills investments required to participate in the later steep rise in grid expenditure.

The NTCSA’s Jacob Machinjike said that it was acutely aware of the difficulties posed by the roll-out profile and revealed that it was working on various options for “smoothing” its procurement, including contracting for components ahead of time.

Machinjike also indicated that the NTCSA had developed an industrialisation strategy with the help of consultants and was finalising a “procurement pack” for issuance to the market during November.

It would also conclude a strategic agreement with the Industrial Development Corporation (IDC) aimed at using the TDP as an anchor for the development of domestic industry and to pursue “strategic procurement” with verified suppliers.

“This strategic agreement with the IDC is a critical step towards ensuring sustainable industrial growth, local supplier empowerment, and the successful execution of South Africa’s energy infrastructure goals.”