The South African Photovoltaic Industry Association (SAPVIA) is calling for immediate clarity from the Department of Trade, Industry and Competition (DTIC) about its approach to localisation, specifically in the South African solar photovoltaic (PV) sector.
The DTIC and the National Treasury have stipulated minimum thresholds for local content across several sectors – including solar PV components – with the intent being to encourage local manufacturing and, ultimately, industrialisation in South Africa.
"SAPVIA and our members fully support the intent. However, in the case of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and the Risk Mitigation Independent Power Producer Procurement Programme (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.
"The result? In the process, bidders who would have been eligible (with the exemptions now granted retrospectively) were disqualified.
"We are calling on the DTIC to provide clarity on the process and rationale used for the granting of exemptions from local content requirements to the entire market, fairly, with sufficient time for bidders to prepare compliant bids," SAPVIA highlights.
It adds that, while the process that has been followed, especially in the case of the RMIPPPP, should 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 an effective localisation strategy for solar PV specifically.
"Designated local content (DLC) requirements were not enforced throughout Bid Window 1 to 4 [of the REIPPPP] due to the infancy, then, of the local manufacturing sector to meet the demands of government’s renewable energy procurement. This capacity has largely stayed the same, compounded by a procurement hiatus over the past several years.
"This lack of certainty of market demand, has, in fact, prevented sustained investments 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," the industry body states.
SAPVIA’s own intelligence and research suggests that local manufacturing capability to meet DLC requirements for the entirety of the ongoing procurement rounds, is not in place, it points out.
As a priority, research, data and insight into the local manufacturing and assembly capability and potential must be conducted, SAPVIA notes.
"The DTIC needs to use empirical data to drive the implementation of policy, an effort SAPVIA has consistently been advocating for and availing itself to assist in obtaining. 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."
SAPVIA says it believes there are plenty of feasible and realistic possibilities that should be considered if the industry is to realise the full potential of localisation.
"It is our view that DLC and local content requirements should and can be used fluidly to achieve the core objective of local economic development.
"Consider, for example, a scenario where component suppliers achieve a certain level of local content on a designated component by using locally manufactured inputs in producing a final product (the final product being assembled abroad), which is then brought into the country.
"In this process, the local manufacturing part of that process supports local value chains, so too does the local distribution and installation of finalised products.
"In another scenario, local assemblers import the bulk of subcomponents, and these undergo local assembly processes and produce a final product with a certain local content value. This process also achieves the objective of local value capturing and job creation," it points out.
In both scenarios, there are advantages to be reaped in South Africa. "And this is not an exhaustive list of the ways in which we can maximise localisation in a more creative manner," SAPVIA states.
Both examples have the added benefit of enabling multiple levels of investment by leveraging multiple approaches to localisation. "It is our firm belief that localisation should not be a rigid policy tool but rather a fluid one where the objectives of national industrialisation policies are achieved by working in concert with the renewable energy industry to capitalise on opportunities."
The objectives of DLC are to drive local industrialisation and value capturing, to the benefit of the local economy. SAPVIA’s position is that DTIC should remain open to engaging more broadly and strategically in achieving these objectives.
"We have and remain open to assisting with this effort and creating local economic opportunities and capturing value locally.
"As a member organisation, we continually seek to reflect the priorities and concerns of our members. As such we have canvassed our members and have found that the enforcement, exemptions, and ambiguity around the whole process is directly impacting the current and future success of local industry players.
"SAPVIA fully supports the 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," it states.
The organisation adds that its goal is to ensure that all opportunities for local manufacturing are identified and that local players are allowed the opportunity to realise these.