05 August 2014 | Jolene Shaw | Opinion
Jolene Shaw, Associate Consultant at Tshikululu
Certainly, the South African geographical context holds vast potential for independent power producers (IPPs). The dramatic and vast landscape of the Northern Cape and expanse of the Karoo offer prime property for solar and wind productions. Additionally, the windy coastal areas of the Eastern and Western Cape are ideal for generating power from wind turbines.
The purpose of the programme is threefold: to move away from coal-dominated electricity production, thereby reducing carbon emissions; reduce the supply issues faced by the electricity sector; and contribute to economic development in South Africa. This increased focus on economic development is currently also on the agenda of the National Development Plan (NDP), which emphasises the importance of the energy sector in supporting economic growth through job creation.
In order to align with the economic development agenda of the government, the REIPPP has set out parameters within which IPPs can attain certain economic criteria through development projects. The areas of focus include job creation, local ownership, economic development (ED) and socio-economic development (SED). These projects are to be operationalised in the project company’s respective local communities, calculated as the communities within a 50km radius of their project site.
Specifically focused on the SED contribution, project companies are advised to contribute between 1-1.5% of total revenue to community projects. This is in line with the country’s Broad-Based Black Economic Empowerment legislation.
IPPs are strategically placed to potentially make significant contributions to the socio-economic landscape of the communities surrounding their operations. This of course requires effective planning on the part of the IPPs, prior to submitting their SED plans to the Department of Energy.
When constructing their SED components, IPPs should take the following into consideration:
Stakeholder engagement: for the project company, its operational and reputation risks can be mitigated by ensuring that the SED process is consultative. Local politics can play a part in derailing operations on the ground which could have long-term detrimental effects on operations. Allaying these possibilities through suitable consultation could assist in creating and nurturing positive community relations.
Raising expectation: due to the initial stages of the bidding process requiring an SED commitment, raising expectations of improved livelihoods is inevitable. Once again, involving the community at the bidding stage and identifying stakeholders who are able to communicate the realities of these types of projects, is often critical to success.
Engaging participatory community needs assessments at the onset of bid submissions: this can be done by engaging development partners already working in the area and who are familiar with the South African context. Where possible, engaging local municipalities’ integrated development plans and the local economic development strategies when outlining projects would show commitment to the South African local government context, and contribute to a broader development agenda.
Commit to having a full-time community liaison/socio-economic officer at the project sites: having someone ”on the ground” to specifically deal with community relations will allow for improved and continued engagement with key stakeholders, and possibly mitigate any disputes which may arise before they become an operational, reputational or goodwill risk.
Collaboration: due to the increased number of approved renewable energy operations, the 50km beneficiary radius has inevitably overlapped. Resources for projects are then duplicated and multiple community trusts – the main vehicle for disbursing SED funds and maintaining governance structures – serve the same area. Collaboration between IPPs would add value to the sustainability of projects. However, collaboration is often hampered by the competitive nature of the bidding process and perhaps the DoE needs to be engaged in providing a more inclusive ”mapping” of project areas that IPPs can employ when considering SED initiatives.
Monitoring and evaluation: once awarded preferred bidder status, IPPs enter long-term operations – up to 20 years – with the DoE. This provides a perfect opportunity to establish indicators to accurately measure SED engagement over an extended period.
Government, development agents and IPPs are all responsible for streamlining the process of the community benefit requirements set out in the country’s REIPPP, and ensuring that communities are able to maximise the potential of these engagements. This can be achieved through developing qualifying criteria that do not encourage mere compliance, but see IPPs as part of the South African development agenda.