Economic Development as a competitive advantage
South Africa’s REIPP Procurement Programme awards projects based both on electricity tariff and economic development (ED) criteria. Since renewable electricity tariffs have decreased over the last few years – 35% and 78% for wind and solar respectively since 2008 – project owners are paying more attention to the competitive advantage of ED targets while increasing the number of local people employed on a project.
According to Greg Austin, MD of juwi Renewable Energies, primary economic development optimization efforts revolve around local content (LC) and job creation which combined account for 50% of the ED score.
Up until now REIPPP projects have been awarded 70% on tariff and 30% on ED.
“We are finding since there is little difference in tariffs between bidders, we have to differentiate ourselves by maximising ED and one strategy is to fully integrate as possible the local community into the projects,” said Austin.
“Renewable energy has contributed massively to foreign direct investment, industrialisation and economic growth in South Africa and the current delay in awarding the next rounds of the REIPP is affecting ordinary people in local communities,“ said Austin, prior to speaking at the African New Energy Update Conference to be held in Cape Town next week.
“In our most recent project the Mulilo-Sonnedix Prieska PV3 Solar, which reached commercial operation in August 2016, the key element of our strategy that lead to juwi being selected as the EPC service provider for the project was due to the high level of employment of the local community in constructing this 86MW solar plant in the Northern Cape.”
The local municipality of Siyathemba (including the towns of Prieska, Niekerkshoop and Marydale) has a total workforce of about 4,800 people. Unemployment is registered at 34.7%, with a participation rate of 57.4%.
“We are very proud to confirm that over 50% of the total number of people employed on the project involving the entire supply chain and construction effort were from the Siyathemba local municipality. 911 or 19% of the total local municipality work force of 4,800 were employed on the project in one way or another.
Total Man Months
RSA Based Citizens
RSA Based Black Citizens
RSA Based Skilled Black Citizens
Citizens from Local Communities
“At the same time we achieved a massive 69% of the total project value that was spent in South Africa, both in the form of construction contractors and equipment suppliers.
“Looking ahead, the IPP unit of the Department of Energy have indicated scrapping Community Ownership and moving this to another evaluation element. There will be no cost implication and this move will support an increased Socio-economic Contribution to the Local Community. I believe this change is a positive one,“ said Austin.
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