by Johan Muller, Tanye Ver Loren Van Themaat

Questioning renewable energy's possibilities

Is there a place for localisation and job creation requirements?

South Africa is finding its feet in the implementation stage of the renewable energy projects

The much needed Clean Energy Development and Finance Centre (CEDFC) came to fruition recently and aims to support the development of the renewable energy landscape not only in South Africa, but also in sub-Saharan Africa.

Subsequent to the recent delay in financial closure for the renewable energy projects of the first bid window, it is evident that South Africa is currently finding its feet in the implementation stage of the renewable energy projects, writes Johan Muller and Tanye ver Loren van Themaat at growth consulting firm, Frost & Sullivan. 

At this critical stage of the initiative of introducing renewable energy to the grid, it stands to reason that anything that promotes investor confidence in South Africa should be considered favourably, such as the introduction of the CEDFC to assist with a smooth transition to introduce renewable energy transformation initiatives into the South African landscape.

Although it is not mentioned outright, localisation and job creation deserve mention from an optimisation point of view.

With current targets set at 25% for localisation and moving up to 40% in following rounds, it is evident that the practicality of these targets needs to be evaluated. Whether the targets are reasonable or not is yet to be discussed, as it forms part of a much wider evaluation.

What does deserve mention is the message being sent to international developers and investors. The purpose of this target is the stimulation of the local economy and the effective transfer of skills, which is weighed up against the project feasibility of investors who are keen to use their own workforce, services and construction components versus our local content.

The argument needs to be raised: when is the tipping point reached where local content is enforced on the one side, at the expense of excluding a potentially better quality product or service from an international source? This topic is open to debate. South Africa as a country stands to lose in the long term, should localisation targets result in less than optimum content. This risk, however, can be mitigated.

Job creation in South Africa remains a challenge, as official unemployment figures are currently as high as 25%, and unofficial figures as high as 40%. These figures are front-of-mind for the South African government, with politicians often making promises of employment. These promises spill over into policies and other socio-economic studies.

With large amounts being invested, both by the South African government and private sector parties, into the energy landscape, the question of ‘How many jobs are in actual fact created by these projects?’ is often raised.

The message is clearly sent that investment funding is more likely to follow projects where there is greater potential to create employment. This stance, seen in isolation, makes logical sense. However, in the context of energy security it should, according to Muller and ver Loren van Themaat, take a back-seat, as the primary purpose of energy projects is to produce energy to correlate with the demand of the industry. This is a long term goal, and both independent of, and dependent on, short term political agendas.

A secondary purpose of energy projects is to create employment. Job creation should, therefore, not be seen as a main driver of investment, which is currently the message being received by industry.

Stakeholders have remained markedly silent on whether renewable energies, and even other forms of energy generation, transmission and distribution initiatives, should in fact be a realistic driver of job creation.

The CEDFC, however, will hopefully provide a fresh international perspective on local requirements, in light of the South African landscape, which will ultimately be accompanied by its own unique set of issues, concluded Muller and ver Loren van Themaat.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.

The companies “growth partnership” supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.



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