The Request for Qualifications and Proposals (RFP) issued by the Department of Energy (DoE) in terms of the Coal Baseload IPP Procurement Programme does not make provision for shareholding by local communities in the project company.
Under the Renewable Energy IPP Procurement Programme (REIPPP), local communities were defined as residential areas or villages in South Africa within a 50km radius of the project site. The DoE previously wanted shareholding of between 2.5% and 5% by local communities in the project company.
Under REIPPP, the job creation economic development element has a 12% threshold and 20% target for South African based employees residing in local communities – the Coal Baseload RFP has increased the threshold level during the construction period to 18% and the target during the construction period is now 30%. Bidders must also note that during the operating period, the DoE has a 20% threshold and 30% target for employees who reside in the local communities.
Developers in the renewable energy space have had to consider issues such as accessibility to the grid, environmental issues and availability of suitable land for development when choosing their project site. The majority of the bid projects have been for location in the Northern Cape, Western Cape and Eastern Cape. Although there is little doubt that these projects will in time benefit the local communities, because most of the projects are located in the same areas, some concern has been raised that the same communities benefit from the projects because of the 50km radius constraint.
When issuing the Coal Baseload RFP, the DoE seems to have considered the concern regarding benefits accruing to the same communities because the 50km local community requirement is no longer included. The Coal Baseload Implementation Agreement has amended the local community definition to be “communities in South Africa located in the area of jurisdiction of the local municipality where a project is located.” The Implementation Agreement notes that in instances where a project is located on the border of two local municipalities, the definition will recognise people living in the area of jurisdiction of both municipalities as local community members. The amended definition does not seem to cater for communities just over the border but next to a project.
To maintain a level of community involvement, the Coal Baseload RFP has increased the level of participation required by community members in other economic development sub-elements that are evaluated by the DoE when considering bids. In particular, the job creation element still places emphasis on jobs for citizens, black people, skilled black people, youth, women and local communities.
Conclusion
By amending the definition of “local communities”, the DoE’s changes to the local community requirements under the Coal Baseload RFP will potentially result in more people (and communities) benefiting from projects located in the same area as them. And a larger percentage of the community can now benefit during the construction and operating period as a result of the increased job creation thresholds and targets.