Opinion / Analysis

The three- to four-year delay in the Coega aluminium smelter project because of electricity supply problems really does leave egg on the government's face.

After years of doubt that the smelter would ever materialise, a power supply agreement was finally signed in 2006, clinching the deal for the government's flagship foreign direct investment.

But another government decision preventing Eskom from investing in new power plants, and the reversal of that decision only in 2004, meant that Coega was not a deal - it was only a pipe dream.

The chances of the smelter, for which the Ngqura port was built, materialising are now remote, despite Rio Tinto's comments that it is still on track.

A lot can happen in three or four years that could affect Rio Tinto's view of South Africa as an investment destination; the company's priorities could also change.

Other projects in better locations with better returns might push the Coega smelter on to the back burner permanently.

Eskom's efforts to build new power plants are under way. This year, with investment accelerated, it expects to spend R23 million every hour to bring on stream thousands of additional megawatts within five years.

Last year it spent about R12.2 million an hour. Since 2004, Eskom has spent a total of R54.6 billion bringing on stream 2 656MW, 1 026km of overhead lines and six new substations.

A lot more capacity is needed. Eskom knows this, but it is in a race against time that the utility can't win, not in the short term anyway.

We are already short of power and the Coega smelter is likely to be the first of many projects that are either delayed or canned altogether.

What a shame that South Africa's strong performance has come to a screeching halt - and that this will be the legacy of the current administration *1.

With acknowledgements to Business Report.