Renewable energy is bearing fruit
REIPPP has improved the lives of rural South Africans in a big way
One of the most important achievements of the highly successful Renewable Energy Independent Power Producer (REIPPP) Programme is often underreported and undervalued.
The programme, which has been praised both locally and internationally, has done far more than just add 3,079 MW to the SA electricity grid at increasingly competitive tariffs. It has had a tangible, positive impact on the lives of the people in the communities in which the projects are located.
The majority of the REIPPP projects are located in remote rural communities which are hardest hit by poverty and extremely high unemployment levels. The programme is structured to support local community upliftment and provides for local ownership and job creation and contributes to social and enterprise development.
The minimum threshold for local community ownership was set at 2.5% as a procurement condition. To date, the shareholding of local communities has been structured through the establishment of various local community trusts which are forecast to receive over R29bn of income after debt costs over the life of the projects (20 years). The programme has created more than 31,000 jobs, 18,000 of which are for individuals from the local community and the requirement is that the projects contribute a percentage of their revenues throughout the 20-year power purchase agreement term to socioeconomic development (SED) and enterprise development (ED) initiatives.
These contributions are to be used towards initiatives that promote the social and economic advancement of people in underdeveloped communities including initiatives focusing on education, health care, and infrastructure development.
A total of R20.6bn and R6.4bn (total R27bn) has been committed over the 20-year power purchase agreement term for SED and ED initiatives respectively with R21.4bn targeted for initiatives in local communities where the projects are located. So far, the 56 operational IPPs have contributed a total of R472m towards SED and ED spend. Some of the initiatives include:
R145m has been spent on education and skills development;
Classrooms to the value of R5.1m have been built; and
261 bursaries have been awarded to the value of R11.9m.
Notwithstanding the significant contribution the IPPs have made and are yet to make to local communities, the programme still faces a number of challenges. One of the concerns is that the immediate needs in the local communities are significant and though R27bn in SED and ED contributions and R29bn in equity income is impressive, these amounts are received over 20 years, with distributions to community trusts only expected once the debt raised to finance the equity has been repaid.
The other concern is that the current programme framework is not structured for and does not encourage collaboration between projects, resulting in each project setting up its own initiatives, some within the same communities. The third concern is that the IPPs specialise in energy generation and, as such, social development and enterprise support is not their core function and area of competence.
The IPPs, therefore, undertake SED and ED initiatives to achieve their bid commitments but choose relatively easier welfare-based initiatives rather than tackling more complex initiatives that would have the greatest impact on the communities such as productive spend that promotes job creation and that stimulates the rural economies.
The programme therefore finds itself at a point where it should explore alternative, more impactful ways to promote local community participation and beneficiation from IPPs. This will require amendments to the IPP framework to:
Promote collaboration and the pooling of funds between the IPPs;
Allow for the fast tracking of social development and enterprise support initiatives through the leveraging of SED and ED spend; and
Facilitate the delivery of sustainable and more impactful initiatives to communities
The REIPPP programme is a success story in SA, which has contributed towards the country’s development agenda and has a great opportunity to forever change the lives of individuals in the most rural of communities.
However, to do so, it must first address the challenges it faces that threaten to limit the programme’s long-term sustainable positive impact on communities.
REIPP has contributed towards SA’s development agenda and has a great opportunity to change the lives of people in the rural communities