(where issues of confidentiality and commercial interest allow) to share and learn from best practice.
Foster community engagement and establish practice guides for IPPs
The rules of the REIPPPP serve as a good basis for providing community benefits, given that they obligate IPPs to make minimum, direct contributions towards their host communities. Nevertheless, there exists an opportunity to strengthen these rules by codifying their implementation into a set of ‘practice guides’. In essence, it is necessary to guide IPPs on topics such as when and how to engage local stakeholders and the community at large; to specifically outline the types of studies that must be undertaken at project inception and on an ongoing basis; to suggest ways to collaborate with local government; and on how to create long-term strategic social investment plans, amongst others.
What follows are recommendations for strengthening existing rules through codified guidelines for IPPs.
Job Creation (in conjunction with enterprise development): As part of the community engagement process preceding bid-submission, project developers are required to ascertain the skills development requirements of communities with a view to providing training for more substantive participation in the projects. Previous bidding rounds were executed at a rapid pace, making it difficult for projects to prepare communities for opportunities such as skilled employment and service provision. As a consequence, beneficiary communities have assumed the least skilled roles and provided low-value services to projects, most notably catering and grass-cutting. A crucial driver of the under-investment in communities is also the funding structure of projects. Because social investments only flow during the operational phase, project developers have typically waited for this phase to then distribute funds towards skills and enterprise development. Project developers should prioritise investments that are intended to provide permanent jobs, and should set long-term service-level agreements for local community members and companies. This can take the form of a multiplier for every Rand spent, and could be integrated into the procurement rules.
Furthermore, targets could be set for a defined percentage of the plant operations contract, defined in terms of service provision not equity ownership, to be in the hands of the local community by a certain
Community Ownership (Equity): Instruments
for community ownership should be fully constituted and given access to professional services prior to the establishment of IPP projects. Currently, Community Trusts are established by IPPs and permitted to form part of the equity structure of a project without any community participation. It is recommended that community trusts be treated as broad investment vehicles with the ability and intent to invest in other revenue-generating investments. In so doing, the trusts can serve a longer-term objective as community wealth funds that are not solely dependent on the IPP for revenue. This structure may be funded through development financiers, who could be empowered to appoint legal and financial advisors to negotiate their own funding terms. The REIPPPP could also incentivise active participation of Community Trusts, by allocating additional points to those that also own the land on which the project is built, and that participate in core value-chain activities. It is suggested that, in future renewable energy procurement rounds, host communities should receive necessary support to ensure they have more effective organisational skills, and be encouraged to seek out co-development partnerships with IPPs, using forms of capital such as land or collective savings. In conclusion, measures should be instituted for monitoring and evaluating Community Trusts and any other community ownership vehicle.
Currently, trusts are not required to report to the IPP Office on their composition, activities and impact.
Instead, community ownership vehicles should be subject to standardised, statutory quarterly reporting requirements that include governance, financial management and development impact obligations.
SED and ED Spend: While there is nothing wrong, in principle, with the development role that the private sector takes on in the REIPPPP, it is important to keep in focus that SED and ED spend are a function of the state-sanctioned licence to operate. It is thus recommended that the state reorient its approach in the following key ways:
Municipal alignment: The state should also determine key focus areas for development in each municipality and impose such a focus on IPPs, in collaboration with proven community priorities (as expressed in the Participatory Rural Appraisal, PRAs). Investing in these areas does not have to occur through the municipality, but should be collaborative, ensuring that the IPP’s budget
Collaboration should be governed by a public social contract or memoranda of understanding.
Elective deference: IPPs should be given the option to delegate the management of their SED/ED spends rather than managing this themselves. Many IPPs lack the capacity, interest and understanding to devise workable social investment strategies. Indeed, despite a genuine interest, many IPPs fail to implement their plans as a consequence of the complexities inherent in community development work. It is thus recommended that IPPs should be permitted to defer to the state in executing their duties; and that the state may, in turn, contract third-party service providers to execute the IPPs’ mandates on their behalf.
Programme-based logic for scale: Given financial constraints, IPPs should not be permitted to invest in more than three or four SED programmes and two to three ED programmes. Assuming an annual budget of circa R5 million, this allows for at least R500,000 to be spent annually on each programme that delivers on the spread of employment and enterprise development in the marginalised communities.
Connect REIPPP programme’s socio-economic contributions to the Sustainable Development Goals (SDGs)
Finally, it is recommended to connect and align the socio-economic objectives of the REIPPP programme in South Africa with the global Sustainable Development Goals (SDGs). South Africa is among the 193 member states of the United Nations to have ratified the Sustainable Development Goals (SDGs), and 179 parties to have ratified the Paris Agreement (United Nations 2018;
IRENA et al. 2018). Moreover, prior to the ratification of these international goals and commitments, South Africa’s National Planning Commission had already developed the National Development Plan (NDP) with similar objectives. While the NDP is broadly aligned to the SDGs, it includes transformation requirements, specific to the history of institutionalised racism and deep persistent inequality in South Africa (NBI 2016).
The objectives of the REIPPP programme help to reach the SDG 7, which aims to “[e]nsure access to affordable, reliable, sustainable and modern energy for all” (IRENA et al. 2018). However, the co-benefits that this study has identified also support both SDGs as well as NDP commitments, as shown in the table below.
Table 8: Alignment of REIPPPP co-benefits to
Additional employed persons in house-holds
SMMEs directly funded or otherwise supported (in kind) Types of businesses Changes in income School enrolment
(and level of
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