investments in electricity over the period 2003-2010 are of the order of $ 0.52 billion (R 3.37 billion) or about 0.2% of GDP. It should be noted that this covers only generation, excluding transmission and distribution and operations and maintenance expenditures.

How do these investment requirements compare with local estimates of investment needs? For electricity, Eskom has estimated average annual investment needs in electricity generation, which are approximately of the order of $US1.0 billion, but this includes the cost of investment and rehabilitation of transmission and distribution and a margin for peak demand (Eskom 2005). Therefore, our estimates related to electricity production only appear broadly in line with the ones prepared by Eskom. It should also be noted that while our estimates rely on a robust, multi-country estimate of demand for electricity that is used to forecast South Africa’s needs using projected demand variables, Eskom’s estimates rely on engineering projections based on South Africa’s time series of electricity consumption.

# **An Accelerated Growth Scenario**

The above forecasts are based on the consensus IMF and World Bank predicted growth rate of South African GDP in the medium term before the adoption of the accelerated and shared growth policy agenda. The forecasts also include corresponding growth rates in the agricultural, manufacturing and services sectors.

We now consider the investment needs in electricity under an alternative, accelerated growth scenario, with the average annual GDP growth rate of 6 percent identified by the South African government as a policy target. The purpose is to illustrate how electricity infrastructure investment requirements would change if a significantly accelerated growth scenario were to materialize in the coming years. Such an exercise is relevant and timely for two reasons. First, South African economy has been growing at an accelerated average annual growth rate of about 4 percent per year since 2004 and the short term outlook remains strong. Second, the officially adopted accelerated and shared growth initiative of the South African government is aiming for just such 6 percent annual growth, albeit suggesting that might only be attainable after 2010. Our illustrative, accelerated growth scenario features a more ambitious growth path of 6 percent already achieved during the period 2006-2010. As such, our two growth scenarios discussed in the paper should cover the range of possible growth paths in this period with associated investment requirements in electricity.

The forecast of electricity generating stock under our accelerated scenario now indicates that electricity production would grow from 4815.47 kwh per capita in 2002 to 8179.43 kwh per capita in 2010 (over 25 percent greater than the earlier forecast). The required average annual investments over the period 2005-2010 are now of the order of $0.96 billion (R6.23 billion), almost double the forecast under the lower, current GDP growth rate.

The main implication of considering the accelerated scenario is that it implies considerably higher electricity investment requirements to sustain the virtuous circle of 51