Close to 400 industry jobs have already been lost just two months after at COP17 South African financial services group Investec and the European Investment Bank (EIB) had confirmed the establishment of a €100-million renewable energy fund to promote clean energy generation and energy efficiency initiatives in South Africa.
Local businesses involved in the renewable energy sector are in danger of going belly-up, because the Integrated Resource Plan (IRP2) allowed power producers bidding for renewable energy projects to mostly use imported components, said the Labour Federation and the Cape Chamber of Commerce.
These words were not even cold yet, and already 4 businesses in the Western Cape have shut down with 3 more facing closure by April this year.
Cosatu wants 65% local content
The current local content requirement for projects bidding under the IRP2 is 35% but union federation Cosatu said they want it increased to 50 or 65% and threatened to launch demonstrations to put pressure on the government to head their demand.
“We are concerned that we have subsidised jobs in other countries, because jobs are being imported,” said Mike Louw, the provincial co-ordinator of Cosatu in Western Cape.
“The slow processing of these changes to the IRP2 has an impact on the commitments made at the COP17 (climate change talks). So we want to put pressure on stakeholders. Protests will be called and we are pushing for meetings with all the departments involved,” Louw said.
Marius Mocke, general manager of Solar Dome, who has been manufacturing solar water geysers for 42 years in Stellenbosch is but one of the companies bearing the brunt of this fatality. They were forced to stop manufacturing in December last year.
“We had to let go of 20 staff members so far. We can’t compete with the prices of the imported market any longer. It’s just not viable for us to manufacture 500 products per month and only sell 20.”
He said many other solar energy companies have also fallen foul to the increased regulatory costs and unclear policy that came with the advent of the state’s solar water heater (SWH) roll-out programme – led by Eskom, which is subsequently causing a chain effect on all other companies.
Work goes to overseas companies
“It’s tragic that I have to say this, but local companies are not being protected by the government. We have the capacity to provide the solar needs of the country; instead overseas companies are chosen to do the work. The rebate could be as high as R5 000 per unit and does not differentiate between local and imported units. Chinese companies are able to sell their products at a much cheaper rate than us. Because business is bad for us, other companies are also losing out on money as a huge chunk of profits relied on our manufacturing process,” he added.
Andrew Etzinger, Eskom Senior General Manager – Integrated Demand Management however said the rebate programme will be changed to introduce a differential in rebate between local and imported systems, adding that an announcement on the rebate differential is expected to follow shortly.
“Eskom is a supporter of local suppliers. To this end the methodology to determine the percentage local content has been a contentious point which has thankfully been resolved 2 weeks ago through debate and extensive consultation with the SWH industry. There is no limit in place for high pressure solar water heater rebates,” he said.
He added that they are aiming to introduce an incentive programme for PV systems in due course, which however is subject to regulatory approval.
Renewables industry has capacity to produce 70% locally
The executive director of the Cape chamber, Viola Manuel, said the local renewables industry had the capacity to produce at least 70% of what was required and only awaited regulation to allow it.
“We also want the definition of local content to be clarified, because currently it includes drilling holes and civil works,” she said.
At Solairedirect Technologies in Bellville South, 100 employees may soon be without jobs said Ajay Lalla, the managing director. He said the company was in distress.
Solairedirect had invested close to R70 million in its facility with financial help from the Industrial Development Corporation (IDC) and a Department of Trade and Industry (DTI) grant to prepare for the IRP2. It bid for two 10 megawatt projects in the first window of the renewable energy independent power producer programme last year, but was unsuccessful.
Had the projects been approved, Lalla said, the number of people the company employed would have doubled.
Only 2 locals chosen
“There were only two South African companies chosen and only 30MW from South Africa. If local content is increased, suppliers would get better costing and there would be more competence,” he said.
The government’s New Growth Path (NGP) identifies the green economy as one of the six key drivers of growth.
The NGP targets 300 000 additional direct jobs by 2020 to green the economy, with 80 000 of those in manufacturing and the rest in construction, operations and the maintenance of new environmentally friendly infrastructure.
In December last year, the IDC together with the Development Bank of Southern Africa and Trade and Industrial Policy Strategists, launched the Green Jobs Report, which showed the green economy could create more than 460 000 new direct jobs by 2025.
Main image: Marius Mocke is shutting down his solar water heater factory in the face of cheap Chinese imports and an unfriendly South African regulatory environment. Photo: Leon Lestrade (source)