South African renewable energy programme: benefits of local community investments

In order to ensure that the construction and operation of renewable energy projects in South Africa is not hampered by unsatisfied local communities it is important that borrowers’ and sponsors’ alike invest in educating local communities on how they derive benefit from the projects.

Since our article of September 2014 (Renewable energy projects: community related protests) we have noted an increase in local community protest in and around renewable energy projects. The protests are due in part to local communities not fully understanding the mechanisms provided for in the project related documents in terms of which the local community derives benefit from the project.

The benefits for the local communities include shareholding in the project company, job creation during the construction and operational phase of the project and borrowers’ investment in the local community. Training and educating the trustees of the community trust is essential. This training should include education in governance, financial management, investment planning, community development and basic business principles.

The frequency and duration of community protests by local communities could prejudice the construction and operation of the project. It is therefore imperative that sponsors and borrowers continuously seek to engage with a community to identify that community’s specific needs and refrain from using a one-size fits all approach.

Community engagement has a fundamental role to play in building social capital and engendering real empowerment.

Given that the life-span of the renewable energy projects averages 20 years, it would be advantageous to develop and maintain transparent and good relations with the local communities at the outset in the manner described above. Inadequate communication and involvement frequently jeopardises working relationships as well as effective governance and implementation of projects.

For developers, this should not only be an incentive to avoid the construction and operations of the project being prejudiced but reputational issues should also be considered. Community engagement has a fundamental role to play in building social capital and engendering real empowerment. Developers who have a well-established track record with local communities will not only benefit financially but also from a reputational perspective.