A closer look at REIPPPP bid window 5

The Department of Mineral Resources and Energy (DMRE) recently launched the Request for Proposals (RFP) for the Fifth Bid Window (BW5) under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which calls for proposals from Independent Power Producers (IPPs) to develop new generation capacity of 2 600MW, including 1 600MW from onshore wind energy and 1 000MW from solar photovoltaic (solar PV) power plants, in line with the government’s intention to increase generation capacity and ensure the security of energy supply to society. Ahead of the expected DMRE Bidders’ Conference, to be hosted on an e-platform, during May 2021, which will provide more information on the qualifying criteria and bid submission expectations, the South African Wind Energy Association has shared its impression of BW5.

“There are two key aspects of BW5 that are worth unpacking, namely the local content requirements and the bid evaluation weighting, which has now shifted in line with governments standard procurement norms,” said Ntombifuthi Ntuli, CEO of SAWEA.

LOCAL CONTENT

The BW5 local content threshold has been retained at 40%, in line with previous rounds.  The difference in this round is that there is no local content target, only the threshold is prescribed. Furthermore, for the first time, the REIPPPP introduced designated local content, which, over and above the threshold, requires bidders to procure certain specified components locally. Should these components be unavailable, bidders can apply for exemption, which needs to be lodged with the Department of Trade, Industry and Competition (DTIC).

The wind industry had extensive consultation with the IPP Office and dtic prior to the issuing of the BW5 RFP, specifically on local content requirements and what the industry can achieve in the short and medium terms. To achieve a successful localisation programme with incremental local content thresholds, a consistent procurement pipeline should be established. This would be a positive development as it facilitates augmented job creation and skills development as the economy recovers from the Covid-19 pandemic and looks to accelerated economic growth.

“Consecutive bidding rounds will enable local manufacturing facilities to be re-established and the potential expansion of already operating manufacturers, which is very crucial in creating long-term sustainable jobs,” added Ntuli.

SAWEA has, however, cautioned that the stop-start nature of procurement, and the latent bid windows, severely damaged the meaningful momentum, pre-2015, which established new manufacturing capacity within the wind and solar value chains in South Africa. Significant manufacturing capacity was lost in the delay between BW4 and BW5, with many companies being forced to shut down as a result of the delays, unable to carry the cost of overheads indefinitely.                

                                 

WTG Technician in position to guide rotor into position on the nacelle.

Looking at the recovery of the manufacturing sector and the possibility of re-investment, Ntuli commented, “Whilst we wholeheartedly celebrate the new impetus, one must be mindful that regaining the investor confidence will not be an overnight process. To enable the required quantity and very importantly, quality, of components will require at least two to three years of investment and development. It is therefore crucial that further interruptions or delays are not encountered. A controlled roll-out of procurement will allow all aspects of the value chain, and not only the manufacturing sector, to expand.”

SAWEA confirms that the industry remains confident in its ability to meet local content requirements and reiterates that it has no reservations or concerns that the sector will respond positively. The Association has facilitated conversations between the DMRE, DTIC and the other key sector stakeholders, to align strategically and map the way forward to deliver on increased local content requirements.

“The wind industry has further submitted its vision to practically increase local content in the next few years and remains fully supportive of growing the local manufacturing sector,” explained Ntuli.

The Association is further heartened by the establishment of the South African Renewable Energy Masterplan (SAREM), which is set to contribute immensely to fast-tracking the establishment of local manufacturing capacity. It is intended that this framework will provide a blue-print from which government departments such as the dtic and the DMRE can provide incentives for investment into local manufacturing.

This is once again important for future bid windows and the renewable energy sector’s ability to deliver jobs and investment, in the post-Covid-19 recovery period.

“SAREM represents an opportunity to identify jobs and investment in our sector linked to the country’s resource plan, as well as to clearly outline how job creation and investment might be enhanced if impediments are removed and replaced rather with supportive policy,” added Ntuli.

BID EVALUATION WEIGHTING

A noted change in BW5 is the evaluation weighting, which has changed from a 70:30 weighting to a 90:10 weighting, indicating a distinct emphasis on tariff. Black women ownership in the project company is a new requirement and has a 5% threshold, otherwise, all other economic development requirements as per BW4 have been retained.

In previous rounds, the REIPPPP used a 70:30 (price: economic development), weighting, attaching higher priority to economic development objectives than the typical government structure of 90:10 at the time.

In closing, SAWEA has noted that the DMRE’s statement reveals that given the energy challenges the country is facing, the qualification criteria have been developed to promote the participation of projects that are fully developed and will be able to be constructed and connected to the national grid as soon as twelve months from financial close, but not later than twenty-four months post financial close.

        

                               

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Deputy Minister Fikile Majola on Special Economic Zones

Special Economic Zones will play critical role in Economic Recovery Plan

16 Mar 2021

The Deputy Minister of Trade, Industry and Competition, Mr Fikile Majola says the Special Economic Zones Programme will play a critical role in the implementation of South Africa’s economic reconstruction and recovery plan.

Majola was addressing Members of Parliament belonging to the Select Committee on Trade and Industry, Small Business Development, Tourism, Employment and Labour, on the progress of the implementation of the Special Economic Zones and the Industrial Parks Revitalisation Programmes which are both driven by the Department of Trade, Industry and Competition (the dtic).

“The Special Economic Zones Programme is expected to play a very significant role in supporting the implementation of the country’s economic and recovery plan. This is due to the fact that the SEZ Programme is at the core of the reimagined industrial strategy, which is purposefully structured to stimulate local and foreign direct investments. The SEZs are also going to play an important role in the African Continental Free Trade Agreement as we position our country to become a vibrant manufacturing hub of the  African continent,” said Majola.

Majola indicated that the implementation process of the SEZ programme requires collaborative efforts from all spheres of government to ensure that the roll-out of the programme was efficient, integrated and well-coordinated.

“It is only through cooperation at national, provincial and local government levels that we can successfully build an inclusive economy.  Inter-governmental relations, both horizontally and vertically, are important in us achieving the set objectives of the reimagined industrial strategy. The efforts of pursuing a coordinated framework through the District Development Model approach has presented an opportunity for the creation of a balance ecosystem for an integrated development,” added Majola.

He expressed his delight at the fact that the implementation of the new intergrated approach of ensuring that national, provincial and local government work together and share responsibility for the implementation of the SEZ programme was bearing fruits. He said the Tshwane Automotive Special Economic Zone clearly illustrated the positive impact of the implementation of this approach.

“The success of the Tshwane Automotive SEZ has reignited the desire and the vision to turn the Gauteng city region into a single multi-tier and integrated SEZ. This is one of our recent shining examples of successful SEZs, joining the likes of Coega, Dube Trade Port and East London SEZ,” added Majola.

MPs learnt from the dtic presentation that despite the devastating impact of the pandemic on economies throughout the world, the value of private investments in the South African SEZs increased by R1.8 billion from March 2019 to March 2020 from R17.7 billion to R19.5 billion.

The number of operational investments increased from 129  to 143 in the same period.  It is expected that the number and value of operational investments will increase by almost R10 billion when the next financial year ends.

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TFG supports DTIC’s on-going commitment to local manufacturing development

Leading fashion and lifestyle retailer TFG, celebrates the advancement of local manufacturing development following Minister Ebrahim Patel and the Department of Trade, Industry and Competition’s (DTIC’s) commitment to the Retail-Clothing, Textiles, Footwear and Leather (R-CTFL) Masterplan.

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