Patrice Motsepe’s AREP – Much To Do About Nothing?

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There has been much speculation and some fake news that one of South Africa’s most successful businessman, Mr Patrice Motsepe, the founder of African Rainbow Energy and Power (AREP) stands to benefit from the unbundling of Eskom. Is it much to do about nothing or is there substance in the claim?

Before looking into the claims against Motsepe, we must consider that that the energy sector and specifically South Africa’s power utility Eskom, is being used as a political football by the two dividing factions within the ANC. Eskom is in a dire position right through its value chain and has the potential to compromise the country’s sovereign risk. On the one hand, the Zuma faction appears to be using the utility to make the country ungovernable by inducing load-shedding through nefarious means and on the other hand, the Ramaphosa faction is trying to get the utility back on its feet.

Patrice Motsepe is arguably South Africa’s most successful businessmen.  The South African billionaire made his money in mining. He is the founder and executive chairman of African Rainbow Minerals, which has interests in gold, ferrous metals, base metals, and platinum. He sits on several company boards including being the non-executive chairman of Harmony Gold, the world’s 12th largest gold mining company, and the deputy chairman of Sanlam. In 2012, Motsepe was named South Africa’s richest man, topping the Sunday Times’ annual Rich List with an estimated fortune of R20.07 billion. Motsepe is an astute businessman, clinical in his approach and a very hard worker. He is an example of what a black person can achieve post-apartheid and deserves very bit of his success. His reputation as an ethical businessman remains unblemished.

Mostsepe founded Africa Rainbow Energy and Power (AREP) and appointed Eskom’s ex CEO, Brian Dames as its CE. The company focusses on clean energy solutions including renewables, hydro, gas and complementary transmission investments. Motsepe is part of the Breakthrough Energy Ventures Fund that was started by Bill Gates and includes Jack Ma, Jeff Bezos, Richard Branson, Michael Bloomberg, Mukesh Ambani and others. The Breakthrough Energy Coalition was established to invest in new technologies to find better, more efficient and affordable energy sources.

AREPS portfolio of clean energy projects in South Africa includes more than 700MW with geographic and technology diversification. Most of their investments have been in solar and wind farm projects that have been successful in South Africa’s renewable energy program (REIPPP). My research tells me that their investment portfolio is diverse (includes gas and other renewable energy technologies) and they seldom take a majority stake, preferring rather to let their independent power producer (IPP) partners to lead projects.

The controversy is all about Motsepe’s two sisters. One is married to South Africa’s Energy Minister, Mr Jeff Radebe and the other is married to the president of the country, Mr Cyril Ramaphosa. No small co-incidence?

Critics say Ramaphosa rushed to sign the Independent Power Producers agreements, all in a bid to support Motsepe, however, Ramaphosa has rejected the allegations. Allegations have also been made against Radebe, who signed off on the 27 Round 4 projects after a 3-year delay. The allegations are unfounded because the IPP’s that fronted the projects have multiple equity partners which include foreign investors, banks, the PIC, pension and green energy funds, local community trusts etc. AREP are stakeholders in some of the projects that were signed off but they are not majority stakeholders in the projects.

Allegations that Radebe is withholding Round 4 company ownership profiles from the public to project Motsepe and AREP, is unfounded. The relevant company information was made readily available when the projects were signed off in April 2018. The projects are typically registered in a Special Purpose Vehicle (SPV). Any company shareholder profile for the relevant SPV for each project can be accessed via the Companies And Intellectual Property Commission (CIPC) website. None of the renewable energy projects to date have been directly awarded to Motsepe’s company.

There is also no substance that Motsepe’s company stands to benefit from Eskom’s unbundling into generation, transmission and distribution announced by Ramaphosa at his State of the Nation Address recently. Motsepe’s company only invests in transmission if it is required to connect its interests in renewable energy projects.

There is however substance regarding a possible conflict when it comes to future gas projects. There are just too many ‘co-incidences’ here:

  • It was recently announced that a massive gas deposit has been found 175km off South Africa’s coast South of Mossel Bay.
  • Ramaphosa’s old colleague from MTN, Phuthuma Nhleko has surfaced as the major South African beneficiary of the new gas discovery.
  • Nhleko bought Ramaphosa’s company Shanduka when he became Deputy President.
  • South Africa’s new Integrated Resource Plan (IRP) drafted by the Ministry of Energy under Radebe has allocated an unprecedented 8100 Mw to gas generated power.
  • Mostepe’s AREP lists gas to energy as target projects.

Ramaphosa repeatedly has used the phrase ‘watch this space’. No doubt we will.

Author: Bryan Groeendaal



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