Zuma says Eskom will sign renewables contracts amid disrupted, economy-focused Sona

9th February 2017

By: Terence Creamer

Creamer Media Editor

     

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President Jacob Zuma announced on Thursday that Eskom would sign the outstanding power purchase agreement (PPAs) for renewable energy projects that had been procured during the most recent rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Zuma made the announcement in his State of the Nation Address, which focused strongly on the economy, but which was delivered against the backdrop of tightened security, including a controversial deployment of 441 soldiers to support the police to “maintain law and order during the Opening of Parliament”, as well as growing opposition to his Presidency.

Besides the now customary disruptions inside Parliament led by the Economic Freedom Fighters, whose members were eventually forcibly evicted following a brawl, the Democratic Alliance sought a moment of silence for the 94 mentally ill patients who died when they were transferred to unlicensed care facilities from Life Esidimeni in 2016. The official opposition also eventually left Parliament ahead of Zuma’s address in protest over the presence of armed soldiers in the Parliamentary precinct.

Zuma said renewable energy formed an important part of the country’s energy mix, which would also include gas, nuclear, hydro and coal. “Eskom will sign the outstanding power purchase agreements for renewable energy in line with the procured rounds.”

He also stressed that government remained committed to its independent power producer programmes, which would be extended beyond renewables to included coal and gas.

The President's renewables announcement should end an impasse that has endured since the middle of 2016, when Eskom indicated that it would not sign further PPAs until it had received guidance from government on the matter. The State-owned utility argued that the capacity would raise tariffs for the consumer, as they would not be needed until at least 2021, owing to surplus capacity that had arisen as a result of a combination of lower demand, stabilised supply from the exiting coal plants and additional capacity from Eskom’s Medupi, Kusile and Ingula projects.

As a result nearly 40 projects had been left in limbo, causing distress not only among renewables investors, but also among suppliers and contractors. It had also left facilities developed to supply into the REIPPPP standing idle, including DCD Wind Towers, near Port Elizabeth, which faces possible liquidation.

The South African Renewable Energy Council (Sarec) said it was pleased to note the Presidency’s clear support for the REIPPPP, while the South African Photovoltaic Industry Association (Sapvia) said Zuma’s speech sent a strong message to investors that the renewable energy industry was open for business.

“We now hope that Eskom heeds the President’s commitment to finalise these agreements and the Minister moves ahead with the announcement of the expedited round,” Sapvia chairperson Davin Chown said in reponse to the speech.

Sarec chairperson Brenda Martin added: “We trust that there will now be rapid movement to resolve the impasse in line with the President’s directive.”

RADICAL TRANSFORMATION

Zuma also used the address to unpack his vision for “radical socio-economic transformation, framed by a quote by former African National Congress president Oliver Tambo, who in a speech in London in 1981 said: “it is inconceivable for [political] liberation to have meaning without a return of the wealth of the country to the people as a whole”.

Zuma said radical socio-economic transformation meant “fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female”.

The address lamented the slow pace of transformation in the workplace, as well as low ownership levels in businesses by black South Africans. “Twenty-two years into our freedom and democracy, the majority of black people are still economically disempowered. They are dissatisfied with the economic gains from liberation”

Zuma said there could be no sustainability in any economy if the majority is excluded and that, in his discussions with the business community, there had been an acceptance of “these transformation imperatives”.

“Today we are starting a new chapter of radical socio-economic transformation – we are saying that we should move beyond words to practical programmes.”

The State would play a leading role in driving transformation by using the “strategic levers” available to it, such as legislation, regulations, licences, budgets and procurement.

“The state spends R500-billion a year buying goods and services, added to this is the R900-billion infrastructure budget - those budgets must be used to achieve economic transformation.”

The strategy would also include set-asides for emerging contractors in government construction projects, support for small and township businesses, efforts to address high levels of concentration in the economy and a direct role for the State in mining. The Mining Company of South Africa Bill would be presented to Cabinet and Parliament during 2017.

Zuma announced that further legislative amendments to strengthen the Competition Act would be brought before Parliament in a bid to “open up the economy to new players, give black South Africans opportunities in the economy and help make the economy more dynamic, competitive and inclusive”.

The radical transformation strategy would also use broad-based black economic empowerment charters to “influence the behaviour of the private sector and drive transformation”.

On the contentious issue of the Mining Charter review Zuma said: “The charter seeks to recognise the internationally accepted right of the State to exercise sovereignty over all the mineral and petroleum resources within the Republic. It is also aimed at helping the country to deracialise the ownership of the mining industry. This will help ensure the stability of this industry.”

Also emphasised was the Black Industrialists programme, which Zuma said should mean moving beyond share ownership schemes only. "We would like to see black people involved directly in business, owning factories," he said, adding that the programme had, to date, supported more than 22 entrepreneurs.

IGNITING GROWTH

Zuma acknowledged that the South African economy was not growing fast enough to create the jobs required to reduce chronically high levels of unemployment which have breached 25% on the narrow definition.

He said the economy was likely to grow by only 1.3% in 2017, having expanded by just 0.5% in 2016 and reiterated that the National Development Plan remained government’s main guiding document for dealing with poverty, unemployment and inequality.

He described as “helpful” the partnership forged with business and labour in 2016 under the banner of the CEO Initiative, which he said had been critical to South Africa having avoided a downgrade to junk.

A statement issued ahead of Zuma’s address by Business Leadership South Africa (BLSA) also reflected on the partnership and argued that the country would only make progress in 2017 “if we build on our successful cooperation in 2016 and work together”.

BLSA pointed to “substantive” gains arising from the cooperation between government, labour and business, including the national minimum wage, labour reforms, the establishment of a R1.5-billion small business fund and plans to offer work experience to a million young South Africans.

Edited by Creamer Media Reporter

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