Multi-billion rand sector re-energising the Eastern Cape economy

MEC for Economic Development, Environmental Affairs and Tourism, Sakhumzi Somyo

The Eastern Cape has solidified its position as an important producer of renewable energy and the country’s leader in wind energy following South Africa’s fourth round of bids in the renewable energy independent power producer procurement programme.

Second, only to the renewable energy supremo, the Northern Cape, which has outstanding sunshine throughout the year, the Eastern Cape is the wind energy leader, having secured a further four wind projects.

Our share in the last round translates into 429MW of the total proposed contracted capacity. All are in the onshore wind category.

The latest winning projects take the province’s tally of renewable energy projects to 17 of which 16 are wind and one is solar.

This is quite an achievement for the province, which has garnered a significant footprint in an industry worth billions. 

It also affirms the Eastern Cape’s attractiveness in the competitive wind sector. The province is acknowledged globally as having one of the best wind regimes in the world – certainly better than the average for China or the United States, which have the most wind farms. New Zealand is our closest competitor.

It is also an industry with high stakes – win or lose. If your bid gets the nod, you are rewarded with a 20-year contract to supply electricity to the national grid. Lose, and you and your partners lose the tens of millions of rands that it has taken to develop a bid.

Unsurprisingly, it has attracted a lot of interest from bidders who are among the world’s most influential and experienced players in renewable energy.

The efforts of these players, with their local partners, have been successful and this bodes well for the province. Successful bids have led (and will continue to lead) to jobs, direct investment and opportunities for our local communities, especially entrepreneurs.

It’s a remarkable story.  In the fourth round alone, winning bids will pump close to R10.4 billion into the province’s economy. Over R3 billion will go to local content providers and communities.

Earlier numbers are equally compelling.  During 2013/14, the investment cost for the 13 earlier projects is R25,3 billion, which will generate over 1 070MW. For the first three windows, the local content share stands at R7 billion.

These programmes will also create a significant number of jobs.  The sector measures jobs in job years (one job for one year). And in the first three rounds, these projects will create an estimated 10 400 job years.

Small, medium, and micro enterprises (SMMEs) and big industries will create these jobs.  A lot of effort is going to ramp up the skills and capacity of SMMEs so that they can capitalise on the immense buying power of these projects. As the government, we are very aware that the demands of these projects is unlike anything most SMMEs have been exposed to in South Africa, and we are cooperating with other partners to ensure that SMMEs are market-ready when these opportunities arise.

Our industrial sector should also feel the effect of these investments. Already eight renewable energy manufacturers have established operations in the province; three have made the Industrial Development Zones their home. We are also working towards further enabling the participation of black industrialists at the core of the renewable energy industry.

Then there is the issue of energy security for the province.  Within a short period, the province will have created a multi-billion rand sector, which, within three to five years, will be able to generate on average eight hours of electricity in every 24 hours.

As the provincial government, we are also mindful that these electricity hubs are being built in rural Eastern Cape where jobs and business opportunities are sorely needed. Take a district like Sarah Baartman (formerly known as Cacadu), which has secured 12 projects.  Other districts, such as Chris Hani, Nelson Mandela Bay and Amathole, have also attracted projects. The Joe Qabi District is home to the solar farm.

The procurement process benefits communities located close to the facilities.  So far, the commitments are astonishing. Some wind farms share ownership with local communities, which sometimes own up to 40% of the farm through community trusts. This share is often financed by development finance institutions, and the cost is recovered from dividends. Nevertheless, the trusts will receive a combined net income of R7.3 billion over the 20-year life of the wind farms allocated to the province so far.

The developers also contribute toward socio-economic initiatives in the communities. So far, local commitments for the first 16 facilities come to R3.8 billion, which will be spent over the life of the projects. Most contributions have focused on education and skills development, particularly in maths and science, social welfare and enterprise development. Building a tranche of capable science and maths graduates should be good news for the provincial economy.

It is clear from this tally that the main beneficiaries of this initiative are rural Eastern Cape, and this is helping address the inequalities between the two main business hubs and the rest of the province.

Encouraging is the success of projects in the former homelands. Just recently, a wind farm in the former Ciskei was awarded its license to generate 33MW.  This development bodes well for projects in the northeast areas of former Transkei where there are large resources of land, sun and wind. 

Communities and renewable energy producers continue to work through the challenges around land tenure and develop solutions that benefit all parties.

This collaborative effort is likely to see growing success as work around the new transmission line for this area begins to materialise.

Sun and wind are not the Eastern Cape’s only renewable sources. We are also looking at other equally promising opportunities in solar, biomass and bioenergy.

And it is bioenergy – using crops, vegetation, and other organic waste material as feedstock – which is creating a lot of excitement because of our natural resources throughout the province and its ability to create a large number of jobs.

The Eastern Cape’s renewable energy sector is fast becoming the arrowhead for taking the province into the next decade where sustainable development, job creation, and a transformed economy will allow our people to create better lives for themselves and their children.