Financial analysis of the electrification programme

Mark Davis

Development Southern Africa, 1997, vol. 14, issue 1, 97-120

Abstract: This article presents results from a financial analysis of the national electrification programme. The study benefitedfrom the inclusion of detailed capital cost modelling and data describing trends in the growth of consumption since the inception of the programme. The analysis calculated nett present value and accumulated debt, and quantified the level of subsidies required to ensure that the programme is financially viable. The effect of these subsidies on existing surpluses, possible price increases, and financial transfers between regions is investigated. Financial results are determined largely by capital costs, which are likely to be higher than estimated in previous studies. Electrification results in large losses, with revenues inadequate to cover even operating costs not related to financing, and the required subsidies are about Rl,6 billion per year, equivalent to an average 8 per cent general tariff increase. It is concluded that important questions relating to the source and distribution of subsidies, as well as the inclusion of off-grid technologies, will have to be resolved if electrification is to be sustained beyond the year 2000.

Date: 1997
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DOI: 10.1080/03768359708439952

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