The South African Renewable Energy Independent Power Producer Procurement Programme places economic development obligations on developers. To comply with the local ownership requirement, developers may structure projects so that up to five percent of the shareholding in the project company is held by a local community.
A local community that holds in excess of five percent direct or indirect shareholding in the project company is required to have both an economic interest in the project and exercisable voting rights. Local communities are concerned about when the benefits related to the economic interest will accrue to them. This can have far-reaching implications for renewable energy projects if protests by unhappy local communities are events of default.
Although issues such as the accrual and payment of dividends are generally dealt with in the corporate documents relating to the project company, the mechanics related to these issues are often not communicated to or understood by the local community involved in the project. This results in frustration and has in some cases led to protest action by the local community against a project in which they are involved.
In an effort to protect their investments, funders are increasingly looking to make protests by the local community an event of default in the funding documents. To prevent funders having the ability to default the project for project related local community protests, it is imperative that there is transparency and communication between the developers and the local communities to avoid dissatisfaction amongst the communities.