Financing strategies for growth in the renewable energy industry in South Africa

• Main Authors: J Foster-Pedley, H Hertzog
• Format: Article
• Language: English
• Published: University of Cape Town 2017-10-01
• Series: Journal of Energy in Southern Africa
• Subjects: renewable energy; financing process; seed capital; venture capital; carbon credits; carbon trading; sustainable development; clean development mechanism; investment motives; barriers to investment
• Online Access: https://journals.assaf.org.za/jesa/article/view/3209
• ISSN: 1021-447X; 2413-3051

This study analyses empirical qualitative data collected from key stakeholders in the renewable energy industry in South Africa. As a step on the path towards developing better success in financing for renewable energy entrepreneurs, a financing framework is proposed and used to create a holistic view of the financing process in the renewable energy sector. It allows stakeholders to get an understanding of all the motives, barriers, sources of capital and possible destinations of capital in one system. Many good reasons exist for South Africa to invest in renewable energy with motives dominated by environmental concerns, diversity of supply, job creation and economic development. Internationally, investment in renewable energy projects has been growing despite a significant slump in overall global investment trends. In a decentralised business model, smaller renewable energy based businesses will continue to have difficulty in raising finance in South Africa. Key barriers include the high price of energy and equipment resulting in poor profitability, the reliability and quality of government policy, a lack of awareness and experience and a lack of innovative financing solutions. The study finds there are many expectations for government to address the needs of the industry within the context of its current regulated status. There appears to be a preference for demand side interventions, which rely on levies, subsidies and tax incentives. This paper strives to offer new ways of looking at the financing problems currently being experienced in the industry and proposes an innovative framework to assist the stakeholders in the industry in structuring financing for renewable energy ventures.