Land and financing needed to transform renewable energy
Far away from the group photos, smiles and freshly inked signatures on renewable energy contracts, more than 700km from its Sandton headquarters is the Dorper Wind Farm, between Sterkstroom and Molteno. It is not too far from where I was born, and often, in the eight-hour trip from the Eastern Cape to Johannesburg, if you cast your sights away from the friendly N6 you’ll see a beautiful image of wind turbines clawing through thick-set clouds, as if greeting the heavens.
The choice of the name Dorper may be a direct reference to the sheeprearing heritage of the area. It is one of SA’s poorest areas, a reminder that energy needs are a contested terrain. With online images of community members obediently sitting on plastic chairs in a community hall, one would be forgiven for thinking that the benefit of such programmes is widereaching. This is often presented as a counterpoint to Eskom’s coal-hungry, monopolistic tendencies, but the benefit and utility of renewables require greater scrutiny, particularly many practitioners’ “broadbased” claims.
The conversation about the energy mix has been framed in very narrow terms — either nuclear, coal-based or renewables. But few issues are as simple as a choice between clear options.
An important debate is required about the kinds of structural change needed and the effect they will have on “economic agents”, such as workers, consumers, producers, corporations and policy makers.
Moreover, with the need for historic redress being a societal, commercial and strategic imperative, the inclusivity and transformation aspects are important considerations. One organisation with a keen interest in these matters is the recently launched Black Energy Professionals Association. Much like every other productive sector, the renewables sector does not exist in a vacuum, unaffected by relationships, interests and the power relationships that characterise how business is conducted in SA.
As association chairwoman Meta Mhlari has suggested, the industry continues to be hamstrung by transformational challenges.
“It is still a white male club, because of how it is structured … the way we formulated the contracts, it’s a take-or-pay, it’s guaranteed for 20 years … but it takes up so much money upfront to develop a project, and there aren’t a lot of financiers that are willing to fund you on a ‘risk capital’ basis….”
In the absence of a financing structure, black folk therefore only enter some of these projects, marginally as “producers” (capital willing) and in the main as community trust “beneficiaries”, collectively defined. In addition to the risk capital needed, the other challenge to transformation is land.
One thing needed to enter that sector is “access to capital and access to land … for you to develop those projects you need some land somewhere … even if you’re signing a lease … those are the structural barriers we are talking about”, Mhlari said.
The land issue is clearly therefore not just about food security and tenure, but also the role that such rural land can play in diversifying the mix of energy sources.
On access to capital, Mhlari says the way in which investment and the deployment of patient capital and long-term savings to achieve transformation in the energy sector are approached, should change.
Foreign direct investment was not required. “Our pension funds, the Public Investment Corporations and the Old Mutuals, because they look for fixed income, should be holistically developing ways to finance these projects for black people….”
IT IS STILL A WHITE MALE CLUB, BECAUSE OF HOW IT IS STRUCTURED … THE WAY WE FORMULATED THE CONTRACTS, IT’S A TAKE-OR-PAY
A review of regulation 28 of the Pension Funds Act and how long-term savings are innovatively deployed would ensure that black people do not have to become “BEE [black economic empowerment] beneficiaries” in a new industry.
In the absence of such a move the only real involvement of black entrepreneurs and communities in the sector will be through highly leveraged minority stakes and hastily organised community trustee workshops. Until then, the real deals will continue to be signed in Sandton, and collective approval will be given in Molteno and Sterkstroom.