Why REIPPPP Is Failing To Produce Black Industrialists 14 October 2016

So here’s another article on REIPPPP and transformation. Two topics I never tire of. Two topics through which I wish to gradually reveal to the reader why the intersections between policy and practice are worth dissecting in granular detail in order to make sense of the bigger questions around why (economic) freedom evades us.

EIPPPP is the country’s very successful Renewable Energy Independent Power Producer Procurement Programme. Since its inception in 2011, it has resulted in the award of generation licenses for 92 power plants, leveraging the sun, wind and biomas to create electricity. The sum of this is over 6000MW of energy that will be added to our grid over the next 4 years. It is thousands of jobs created in small towns you didn’t know existed in the Northern Cape, the Eastern Cape and Limpopo. It is a commitment of R25 billion to the development of these communities over the next 30 years. It is new sectors, companies and manufacturing facilities that are growing. This is REIPPPP.

 

One of its transformation objectives is Black ownership. How this is measured is through the equity held by black people in the project companies that own each power generation facility. An additional measure of the programme is black ownership in the entities that construct and operate these facilities. So after 5 years, 92 licenses and R193 billion of investment, what have we achieved with respect to black ownership? In my humble opinion, very little.

 

I say very little, on the basis of a specific view of how transformation is linked to the broader story of freedom. Freedom, by the way, does not liberate Black people alone. more free blacks, women and all subjugated groups are, the more free our entire nation is. In the specific context of energy, freedom also means security of supply. It therefore follows that we ought to concern ourselves with the question of Black ownership, not simply as one of historical redress, but as one of our country’s future energy security. If the majority is unable to independently produce power for our nation, we become fundamentally insecure.

 

Therefore, when I ask the question ‘what has black ownership achieved in REIPPPP?’ I’m asking whether, through this programme, our country is creating a large enough class of black citizens with the ability to independently generate electricity for the nation through renewable energy? The reason we are found wanting in this regard is because we have not grappled truly with what ownership means. Ownership is not simply the ability to organise capital for the purposes of deal-making. That’s finance. True ownership is about the organisation of all factors of production towards the creation of a unique product or service. The black owners we in fact require to secure the supply of energy in our country must have the ability to not only own, but also manage the design, construction, operation and maintenance of renewable energy generation facilities. That’s ownership or in more current language, that’s what makes a black industrialist. And just as we have recognised that we need black firms to do more than hold investments in other sectors, the same applies to REIPPPP. It’s a matter of energy security.

 

So what is to be done? The rules must change. If REIPPPP continues to reward passive ownership of energy assets, the status quo will persist. It is therefore imperative that The Programme’s rules reward participatory ownership. Secondly, black businesses must begin to collaborate. There exists a disjuncture in the black business sector between doers and financiers. In other words, the problem is not that we do not have engineering and construction capacity in the black business sector. The problem is that these firms, the firms that do, have not found ways to partner productively with firms that can raise capital. I therefore look forward to hearing about new mergers and joint ventures that seek to consolidate the economic value that currently exists within the black business sector to create genuine, black renewable energy industrialists in South Africa. And for this, we hope the development and commercial financiers will come to the party.

 

Fumani Mthembi is the managing director of Knowledge Pele. She writes in her personal capacity.

 

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