DTI, Sessa hit impasse over view of SWH industry status

26th January 2015

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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A debate over the impact on the industry of the local content regulations governing solar water heaters (SWHs) has heated up as the Department of Trade and Industry (DTI) and industry body, the Sustainable Energy Society Southern Africa (Sessa) stand firm on their views.

The DTI this week dismissed allegations that the 2013 promulgation of its amended procurement rules for SWHs had contributed to the demise of an industry, while Sessa raised concern that the government department fundamentally misunderstood some of the  points raised by it in recent media reports.

Despite the DTI’s assurances that the alleged “red tape” over local content requirements did not disqualify South African manufacturers from supplying government as it progressed its SWH programme, the industry maintained that the minimum local content thresholds of 70% for SWH tank and collector components were too stringent.

Sessa solar water heating division chairperson James Green claimed that about 6 000 jobs relating to the installation of SWHs and local manufacturing had been lost during the last two years, while about 30 000 locally manufactured low-pressure SWH systems had been sitting idle in factories for the past 18 months as a direct result of the amended procurement rules.

Further, a large number of small businesses established to install and service the national target of one-million SWH systems by 2015 have shut down or cut back on staff.

About five service-sector jobs were created in the installation and maintenance of SWHs for every one job in the manufacturing process.

Shadow Minister of Trade and Industry Geordin Hill-Lewis last week called on the chairperson of the Portfolio Committee on Trade and Industry to hold hearings on the DTI’s local content rules for solar geysers and its impact on employment.

“This is a serious matter, since the local content programme is supposed to encourage South African manufacturing and create jobs, not destroy them. These claims must be investigated fully to determine if the DTI’s local content rules are indeed causing harm to local industry,” he said.

The DTI defended its decision, however, pointing out that the 70% local content stipulation for public procurement was intended to support local manufacturers, and that the South African Bureau of Standards Local Content Verification confirmed that a number of companies had qualified in line with stipulated local content and were ready to supply products when procurement started.

The DTI said in a statement that it had an obligation to “take a broader inclusive view” of the economy and ensure that all participants in the market were afforded “a fair chance” to compete.

Further, the designation of the tank and the collector also eased the administrative burden on manufacturers to prove local content for a range of small components such as screws, glue, bolts, paint, pumps and other components used in various configurations in the manufacture of SWHs.

However, Sessa argued: “Auditing for local content is actually much simpler if calculated on a complete operating system. It avoids the complexities of interpretation and could be manufacturer declared and supported by financial auditing if required in order to comply with government procurement guidelines.”

The association also pointed out that the local content of the two components, the tank and the collector, actually resulted in lower overall local content, falling to about 49%, or 54% of the overall value when exemptions of materials of designated components were included.

“Sessa believes it is essential to remove the obstacles to what promises to become a vibrant industry and significant contributor to South Africa’s green economy,” Green concluded.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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