South African solar PV industry association SAPVIA is calling for immediate clarity from the Department of Trade, Industry and Competition (dtic) on their approach to localisation, specifically with regards to the solar PV sector.
Nivesh Govender, SAPVIA CEO, said the country’s post-COVID-19 recovery would be compounded by unemployment, stagnant growth and electricity shortages exacerbating an already constrained economy.
“It is therefore vital that we attract, acquire and nurture investment, both local and foreign, if we are to propel growth and create jobs,” said Govender.
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The dtic and Treasury have stipulated minimum thresholds for local content across several sectors, including solar PV components, with the intent of encouraging local manufacturing and ultimately industrialisation in South Africa.
“In the case of the REIPPPP and RMIPPPP, it has come to light that enforcement of these requirements has been selective, with retrospective exemptions being applied for some components, seemingly without a rational approach to these critical decisions,” he explained.
Govender pointed out this has resulted in bidders who would have been eligible, with the exemptions now granted retrospectively, being disqualified.
Lack of certainty of market demand has led to no investment in South Africa’s local solar PV manufacturing industry
SAPVIA is calling on the dtic to provide clarity on the process and rationale used or the granting of exemptions from local content requirements to the entire market, fairly, with sufficient time for bidders to prepare compliant bids.
“While the process that has been followed, especially in the RMIPPPP (where in retrospective exemptions were granted) must be called into question, it also shines a spotlight on the lack of empirical data and market understanding that would allow the dtic and other relevant departments to make informed decisions regarding delivering and effective localisation strategy for solar PV specifically,” said Govender.
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While Designated Local Content (DLC) requirements were not originally enforced throughout Bid Window 1 to 5 because of the inability of the then nascent local manufacturing sector to meet the demands of government’s renewable energy procurement, this has created other problems. This manufacturing capacity has remained at the same low level, compounded by a procurement hiatus of several years between Bid Window 4 and 5.
“This lack of certainty of market demand, has in fact prevented the sustained investment into local manufacturing that we would need to develop a local manufacturing base able to meet DLC requirements.
“We now find ourselves in a position where local content, as it is currently prescribed, is difficult to achieve and impossible for the entire procurement round to meet.”
If dtic is to follow through on localisation remit, it needs a better understanding of the local solar PV industry’s capability
Govender pointed out SAPVIA’s research suggests local manufacturing capability to meet DLC requirements for the ongoing procurement rounds is still not in place and suggests research into local manufacturing and assembly capability and potential is imperative.
“This data is needed to ascertain what is to be localised, the mechanisms needed to localise as well as how government procurement can be used to drive increased localisation. All of this is within the dtic’s remit and will ensure they deliver on their stated approach of using procurement to drive industrialisation, based on market understanding.”
Govender said in canvassing their members they have found the enforcement, exemptions and ambiguity around the localisation process is directly impacting the current and future success of local industry players.
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“SAPVIA fully supports dtic’s objectives but believes that clarity and a step change is required if we are to create an enabling environment for local manufacturing and ultimately industrialisation that is both responsible and sustainable.
“Our goal is to ensure that all opportunities for local manufacturing are identified and that local players are allowed the opportunity to realise these.
“This must be done in a manner that leverages our current and future local capabilities but also utilises outside expertise to enhance local opportunities and job creation right here in South Africa,” said Govender.
The topic of localisation of the local solar PV industry was discussed in the Taking advantage of the increased 100MW threshold: the C&I business case webinar.