LOCAL content: LESSONS LEARNED
There has been much debate around the removal of the local-content requirement on aluminium frames for photovoltaic panels by the Department of Trade, Industry and Competition (dtic). The decision has caused questions to be asked of dtic but should also motivate the industry and government to reflect on what local content really means.
By Niveshen Govender, COO, SA Photovoltaic Industry Association
Looking back at the progress we have made since the 2011 launch of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), I can see so many positives.
Recognising that our own local industry was not able to fully realise the ambitious programme targets, government took an innovative stance that was designed to leverage foreign expertise but also provide South Africa with the opportunity to become a major manufacturer of componentry of renewable energy projects.
The local content requirements of the initial Bid Windows of the REIPPPP stipulated a certain percentage of local content and have resulted in several technology and component manufacturers establishing local manufacturing facilities.
According to the IPPO quarterly report, Black South Africans now hold 33% of the shares across the complete supply chain and local communities hold 9% equity in the Independent Power Producers (IPPs) of Bid Window 1 to Bid Window 4.
To date, the R58.5-billion local content spend reported by active IPPs is already 89% of the R66-billion local content expected. This is with 20 projects still in construction, and 71 of the 91 active projects having reached Commercial Operation Date (COD).
All this is to be lauded. However, as I reflect on progress, I must ask, what exactly is local when it comes to local content requirements?
As with everything in life, there is often a happy medium between opposing viewpoints. And this might be an appropriate time to reassess what it is we want from local content requirements as we embark on another decade of renewable energy procurement.
Our definition of local should of course be aligned with government objectives to increase domestic employment through increased industrialisation. But local content should also lead to an enhanced skills base that leads us to leverage foreign expertise to improve the knowledge of our local workers and enable them to add value across the solar PV value chain, not just through manufacturing and construction and in the process, hopefully develop globally competitive products.
Renewable energy provides us with an opportunity for industrialisation. SAPVIA is fully supportive of localisation that builds industry in South Africa in line with the national policy. The framework must support fair and transparent opportunities to both local manufacturers and foreign investors.
There are several solar PV system components that could be locally manufactured if the right conditions are put in place. Add the untapped potential across the African continent which we could look to manufacture for the region and not just South Africa.
All of this must be done responsibly and sustainably, with an eye on balancing the immediate needs of the sector while encouraging investors and incentivising viable local businesses and industry.
A refocus on what local content requirements can only be done through open consultation both nationally and internationally, working with private industry and government to ensure that we have empirical, data-based research as the cornerstone of any plan.
Local content calibrations should begin with an assessment of existing local capabilities and the market potential, while keeping an eye on the planned roll out of capacity – mainly, the IRP 2019.
Going forward, we are keen to continue working with the dtic and other organisations representing the renewables and manufacturing sectors to fully understand the local market potential, currently, and what it can grow into. Only through research and consultation will we be able to chart a forward trajectory that supports increased investment in industrialisation and fosters healthy local competition.
SAPVIA is working hard to create an enabling environment that supports manufacturers. We have reconstituted a Manufacturing Working Group, for both members and non-members, which has representation from various solar PV component manufacturers, suppliers and distributors, both local and international.
This Manufacturing Working Group, under the leadership of its own Chairperson, Patrick Govender and Vice Chairperson, Conrad Harmse, will focus on specific issues that relate to the development of local PV supply-chains, supporting the South African Renewable Energy Masterplan’s focus of identifying and maximising industrialisation and employment opportunities from the implementation of IRP 2019, under the leadership of the Department of Mineral Resources and Energy (DMRE) and dtic.
With the aim to contribute to a meaningful definition and position of local content as it relates to government-led procurement programmes, this Working Group elected officials (Frans-Willem Vermaak and Lourens Vermaak) to represent their collective interests at the South African Renewable Energy Master Plan (SAREM) level.
I would actively encourage as many players as possible from across the industry to come together through this Working Group to allow us to formulate an industry position that will help us tackle the challenges facing our industry.
Together we will map out the component manufacturing, supply, and distribution landscape in South Africa. Through a thorough review of policy, technical and lender requirements for local manufacturing, we will be better able to align with industry capability. We will further engage key policy makers to ensure an enabling environment for local manufacturers and support further investment into industrialisation.
A key ambition for any local content requirements must be to increase skills transfer and development and we will engage with the relevant SETAs to include and encourage youth participation and employment within the industry.
By interacting with other industry groups, our hope is to create a more collaborative sector that will lead to the increased rollout of solar PV in South Africa.
There is always a balance to be struck and compromises that sometimes must be made. However, by working together, we can make sure that future local content requirements really address the needs of the market and support long term policy objectives of both government and industry in the short, medium, and long-term.
- Govender is the COO of the solar PV industry representative body, SAPVIA.