6 years ago

South African Business 2017 edition

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South African Business is a unique guide to business and investment in South Africa. In addition to an up-to-date economic overview of the country, analyses of the main industrial sectors, plus profiles of the nine provincial economies, the 2017 edition of South African Business includes special features on key topical issues such as skills development and education, renewable energy and the REIPPPP programme, and trade with Africa.


SPECIAL FEATURE Renewable energy programme powers ahead A private energy producers' programme has already attracted R200-billion in private investment – and more is in the pipeline. Fast, efficient and adaptable – these are not always the first words that spring to mind when businessmen and investors get together to talk about government. But in the case of South Africa's programme to allow private investors to build renewable energy plants and sell power to the national grid, efficiency and speed have been the watchwords. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) had by May 2016 delivered the promise of 6 377 megawatts (MW) with an investment value of R250-billion and many of the projects are already delivering electricity to South Africa's grid. The REIPPPP has so far seen four phases of bidding (known as bidding windows), and competition among investors is fierce. The most recent, fourth, window attracted 77 bids from which just 13 were chosen, but a further 13 bids were accepted later. Collectively the 26 projects will add 2 205MW of power and inject R23-billion into the economy. The generation mix accepted by the Department of Energy in the fourth window gives a good indication of the preferred types of energy that have characterised the whole REIPPPP: • 12 wind projects (1 368MW) • 12 solar photo-voltaic (solar PV) projects (813MW) • one hydro-power project (5MW) • one bio-mass project (25MW) Solar and wind have been the most popular projects over the life of the REIPPPP (which started accepting the first bids in November 2011), with solar PV generating more interest than the concentrated solar power (CSP) method. According to the South African Wind Energy Association (SAWEA), shareholding for local com- SOUTH AFRICAN BUSINESS 2017 24

SPECIAL FEATURE munities has reached an estimated net income of R29.2-billion over the lifespan of the projects, in most cases estimated to be about 20 years. Some 14 000 new jobs are expected to be created, mostly in rural areas, and more than R30-billion has already been spent on black economic empowerment (BEE) in the construction phase. Johan van den Berg, the CEO of the South African Wind Energy Association draws on a recent report by Moody's Corporation that South Africa has the world's fastest-growing green economy when he says, "We’ve built a R7-billion infrastructure sector in four years, all with private money, creating many jobs and significant new manufacturing capability, while quickly increasing local content beyond 45%." Moody's reported that in 2015 South Africa attracted R63-billion in asset financing for renewable energy projects – a year-on-year growth of 300%. Van den Berg points out that the figure represented 30% of all foreign direct investment in South Africa, a remarkable percentage for a very young sector. "Additionally," he adds, "the cost of wind power has steadily lowered to approximately 40% below the cost of new coal power at Medupi.” Other research, by GlobalData, estimates that a further three GW of wind energy will be added to South Africa's grid by 2020, taking the total up to 5.6GW. The growth of the solar energy sector has been quite spectacular, particularly in the Northern Cape Province. The railway junction town of De Aar is no longer famous only for being in the middle of everywhere – it now boasts significant energy-generating power. Not least because of the 175MW Solar Capital project outside the town, the largest solar plant of its type on the continent. The multi-phase project will eventually attract investment to the tune of R4.8-billion. The Department of Energy has another programme intended to complement the REIPPPP, the Small Projects Renewable Energy Independent Power Producer Programme. This is intended to encourage smaller investors to get involved in pitching for projects in the 5-10MW range. The Department of Trade and Industry (dti) believes there is great scope for local manufacturing in some of the downstream sectors, for example in building infrastructure for renewable energy plants and in the commercial and industrial solar rooftop market. PV panels of public entities will soon have to be made in South Africa and the glass industry could get involved in coating glass for CSP heliostats. The dti has also put forward the idea that there might be some cross-over in capabilities between the automotive sector and the manufacturing sector for renewable energy plants. Partnerships and prices Many partnerships between local and international companies have already been established, with various consortiums winning several of the bigger bids in the REIPPPP. Even where a foreign company is carrying the bulk of the investment, they are obliged 25 SOUTH AFRICAN BUSINESS 2017

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