Discovery’s schtick has always been that it’ll make money out of solving problems that South African society has battled to fix. Medical aid, and the chronic inefficiency in how patients were overserviced, is its most successful application of that principle yet.
But its new energy arm, Discovery Green, has hit upon an idea that could be just as revolutionary for the country – and small business in particular.
Last week, Discovery Green, alongside an unlikely partner in Sasol, launched Ampli Energy, which will provide renewable power to the market of 1-million small businesses in the country at a lower cost than they are currently paying Eskom for power.
Small businesses will be able to use energy obtained from the Msenge Emoyeni Wind Farm, based in the Eastern Cape, on a pay-as-you-go monthly basis. Other solar and wind projects will soon be added to this list.
Andre Nepgen, head of Discovery Green, says this is a big deal because, until now, only large, energy-intensive companies could buy renewable energy from independent power producers (IPPs). This made sense, he says, as mines and smelters had to plan their energy usage over 15 or 20 years and had the financial muscle to sign multiyear energy deals.
“For everyone else, accessing renewable energy has unfortunately been limited to putting panels on your rooftop,” Nepgen says. “Small businesses were also left in the cold because of the serious costs involved – a wind farm that provides 150MW, for example, costs R4bn – so you need to have some sort of risk-sharing mechanism to make this affordable.”
This risk-sharing mechanism has been provided by petrochemical giant Sasol, which underwrites this project, and will use any of the 150MW not bought by small businesses every month.
Critically, Nepgen says this will allow small companies to insulate themselves from soaring electricity prices. “As a country, we have seen massive increases in the cost of electricity over the past decade. South Africa is not nearly the most expensive in the world, but we’re now in the middle of that curve, and people are feeling it,” he says.
A new white paper by consultancy Krutham, commissioned by Discovery, provided the stark comparison. After Eskom’s new tariff increase, electricity will cost 220c/kWh including transmission and distribution costs, while renewable energy like solar and wind ranges between 50c/kWh and 60c/kWh for those able to get it.
Now, there is nuance in that comparison: Eskom’s generation costs alone are more like 145c/kWh, while the renewable costs are what Eskom pays, and the private sector would typically pay far more. Still, the point remains that renewables are cheaper.
The way Ampli will work is, its members will pay their monthly electricity bill as usual to their municipality or Eskom, but they will then receive cash back into their bank account from Discovery, equal to the difference between Eskom’s tariff and the lower-cost renewable energy.
Krutham estimates small companies could save, on average, 20% of their power costs – R30.2bn savings, in aggregate, on the R150bn annual electricity bill to small companies. It could also create an average 52,721 jobs a year, as energy savings are deployed into growth.
“Enabling wheeling access for small, micro and medium enterprises is more than an energy solution – it is a strategic lever for national development,” says Krutham in that white paper. “It can reduce energy costs, stimulate new investment, create jobs, support small business growth, advance environmental goals and contribute to economic transformation.”
The limitation right now is that there is only a small allotment of renewable energy; Sasol and Discovery are only making 150MW available in the first tranche. And this has already been taken up by companies including fast-food outlet Nando’s, NetFlorist, Hatfield Motors, Sealand Gear, the Reach for a Dream Foundation and the Nelson Mandela Children’s Hospital.
Nonetheless, Krutham says this will go some way to address the uneven two-tier energy market.
“Large-scale users are increasingly able to hedge against Eskom’s inflationary tariffs through wheeling and direct procurement from IPPs. Small, micro and medium enterprises, however, remain locked into a centralised, high-cost energy supply model – even as they face growing vulnerability to load-shedding and cost shocks,” it says.
With a smattering of incidents of load-shedding in recent weeks, you can see why a renewable energy option would be attractive.
Homeward bound
Arguably, it was small businesses that absorbed the greatest shock from blackouts: during the darkest days of 2023, when there were a numbing 332 days of blackouts, it was not uncommon to see restaurants, hairdressers and small shops boarded up.
A Nedbank study in 2023 showed that small companies lost revenue of about R9,772 per month on average due to load-shedding, while also incurring an extra cost of R7,169 to cover generators and fuel, and to replace waste goods.
“Small businesses are often forgotten since they only account for 20% of South Africa’s electricity demand, but they also provide 40% of the country’s GDP and make up three-quarters of all new jobs,” says Nepgen. “And the most terrifying statistic is that two-thirds of small businesses shut down or laid off workers because of load-shedding.”
This initiative has been lauded by electricity minister Kgosientsho Ramokgopa as a “sea change in green energy” and an effort to democratise renewable energy. But it sticks out that Discovery has opted to do this with Sasol – a company that provides 8% of the country’s greenhouse gas emissions and is hardly the poster child for clean energy.
Nepgen argues, however, that this wouldn’t have been possible without the petrochemical giant.
“Sasol helps mitigate the risk for this by agreeing to buy any power that is not taken up. You won’t read about this much, but Sasol is actually the largest [buyer] of renewable energy in the country and they have huge experience in managing energy,” he says.
So what about residential consumers, singularly exposed to Eskom’s outrageous tariff calculations? Could this system not be wheeled into homes too?
Nepgen says there’s no reason this shouldn’t happen eventually.
“There are still things that will need to happen to ensure we’ve got the right infrastructure in place to wheel renewable power to households, and then track that usage,” he says. “But technically, it will be possible once we have that in place.”
It couldn’t come soon enough. Any opportunity to provide yet further distance between the much-despised power monopoly and the average South African will surely be applauded.
Top image: Rawpixel/Currency collages.
Sign up to Currency’s weekly newsletters to receive your own bulletin of weekday news and weekend treats. Register here.
