By Ed Stoddard• 23 August 2020
The Department of Mineral Resources and Energy has launched a process to procure 2,000MW of ‘emergency power’ and R40bn in investment. Yet the process looks set to be throttled by red tape and disincentives. That should set red lights flashing.
The Cambridge English Dictionary definition of emergency is “something dangerous or serious, such as an accident, that happens suddenly or unexpectedly and needs fast action in order to avoid harmful results”.
“Fast action” gets to the point here: emergencies must be dealt with swiftly and decisively. On Saturday 22 August, the Department of Mineral Resources and Energy said in a statement that it had “issued the Request for Proposals (RFP) for the Risk Mitigation Independent Power Producers Procurement Programme (RMIPPPP).” The headline of the statement said it was an “emergency power procurement programme”.
“The objective… is, not only to alleviate the current electricity supply constraints, but also, to reduce the utilisation of diesel-based peaking electrical generators. The programme seeks to procure 2,000MW from a range of energy sources and technologies. Proposed technical solutions will have to be dispatchable and be able to provide a range of support services to the grid system operator. All power procured under this programme is expected to be fully operational by not later than the end of June 2022,” the department said.
That is almost two years hence, which would beg an obvious question: why was this not done, say, two years ago?
Then there is this kicker in the statement.
“The RFP is designed to support Broad Based Black Economic Empowerment initiatives including ownership and localisation. Bidders will have to make commitments in terms of job creation, socio-economic development, supplier and enterprise development and skills development. Stringent local content thresholds and targets have been introduced that should provide impetus to the local construction and manufacturing sectors. This RFP is expected to attract investment in the region of R40-billion.”
BEE is official government policy and while its goals are laudable, the results to date have been mixed, to say the least.
The government has also been banging on for years about creating local manufacturing opportunities while the economy has been de-industrialising. This is also supposed to be an “emergency”, which it clearly is: Eskom cannot even keep the lights on in this malfunctioning economy.
Yet the “stringent local content thresholds and targets” — one sees the Department of Trade and Industry’s fingerprints here — and other conditions laid out are hardly going to woo investors. In this kind of an economic emergency, one would expect onerous regulations to be dropped, or trimmed back. If you need a parachute, you don’t ask what percentage of it was made locally. You just need a parachute that works. And in the wake of the Covid-19 procurement scandals, one can only hope that ANC cronyism does not sully the process.
But dithering while the lights dim has been par for the course for this government. Intensive energy users such as the mining sector have for years been seeking to set up self-generation projects. Gold Fields has been trying for three years to get a solar plant up and running to provide power for its South Deep mine. Its CEO Nick Holland said last week that he was confident that approval would be made soon, but it has been three years with load shedding in the background.
Additional and affordable power is needed now. And beggars can’t be choosers. If you really need investors to step up to the plate, provide them with some incentives. But the department’s statement lists only disincentives. So good luck with that 2,000MW. DM/BM