Opinionista Jeff Rudin 13 November 2014

Renewable energy, a prisoner of privatisation

Government has expressed a great deal of confidence in the country’s new renewable energy programme. But a recent study has revealed numerous substantial and lingering concerns – all of which are, more shockingly still, entirely predictable. Is climate change doomed to roll onwards without a viable solution, or can the situation still be salvaged with efficient intervention?

‘The facts speak for themselves’ is a claim that should be avoided lest it comes back to bite the boastful. According to the Minister of Environmental Affairs, Edna Molewa, South Africa’s new renewable energy programme represents ‘bold practical steps’ with ‘significant’ benefits for economic growth, job creation and poverty alleviation.

“Our track record,” she confidently asserts, “speaks for itself.” South Africa’s renewable energy programme has indeed won international accolades. The programme, launched in 2011, aims to deliver a commendable 3,725MW of renewable energy by 2016.

Recent research by Liz McDaid, on behalf of the Electricity Governance Initiative South Africa, challenges the Minister’s self-congratulatory assessment and suggests that the international praise is based only on the amount of wind-generated electricity and the speed with which the programme is growing (from a baseline of near zero).

The programme, however, is much more than technological numbers. Integral to the programme are the various socioeconomic requirements, to which the Minister herself refers. In addition to the ones she identifies – growth, job creation and poverty alleviation – must be added local economic development, community engagement in democratic decision making, skills transfer and the stimulation of small, micro and medium enterprises (SMME’s). McDaid’s research reveals major problems are already evident in all these areas.

What her research doesn’t address is that all these problems are inherent in the design of the programme and are therefore entirely predictable.

The very name of the programme – the ‘Renewable Energy Independent Power Producer Procurement Programme’ – alerts us to the predictable problems McDaid analyses in great detail. ‘Independent Power Producer’ is another name for privatisation.

For present purposes, privatisation means:

  • A minimalist State consequent upon the (partial) shedding of its societal responsibilities by handing over the provision of essential public services to the private sector;
  • The private sector’s primary, if not only, purpose is profit maximisation even though the profit derives from providing essential social needs;
  • Profit maximisation requires a sufficient level of profit guaranteed for a sufficiently long period just to attract the initial capital investment;
  • Capital sees labour as a cost; minimising jobs is accordingly built into the design of everything (notwithstanding the government’s commitment to labour intensive investments);
  • Capital turns citizens with basic needs into consumers able to buy (virtually) anything and in whatever quantity subject only to being able to pay for such purchases
  • Competitive capital is unavoidably secretive, a condition which makes problematic information sharing, particularly with would-be competitors;
  • Outsourcing, the most common form of privatisation, invites corruption. There is no easy way to award public contracts when, because they are invariably so lucrative, they attract large-scale interest from companies all claiming their own exclusive suitability. ‘Tenderpreneurship’ – the uniquely South African term denoting the importance of political connections in the awarding of business contracts – is an inevitable outcome;
  • Local economic development driven by competitive companies and, more especially, large foreign ones, makes public planning, coordination and regulation exceedingly difficult;
  • Climate Change – supposedly the rationale for renewable energy – figures in capital’s thinking only in so far as it offers lucrative market opportunities.

Privatisation’s DNA is to be found in all aspects of South Africa’s Renewable Energy Programme. Indeed, the imperatives of profit maximisation caused the birth of the programme to be delayed until the government found the right formula – and time – in which to seduce capital.

The programme owes both its name and some of its unusual requirements to South African political realities. The ANC’s alliance with both the South African Communist Party and Cosatu means it cannot openly talk about privatisation. What the Government and ANC are required to talk about is job creation and the local economic development upon which it is dependent, as well as poverty reduction. This is why the coyly described ‘independent power producers’ have had socioeconomic considerations bizarrely imposed on to what would otherwise be a contract exclusively about delivering energy.

South Africa’s version of the privatisation of renewable energy means that corporations – whose core, if not only business, is providing dedicated renewable energy – are now obliged to provide:

(a) Between 2.5% to 5% of their ownership to the local community via a specially created Trust

(b)Up to 0.6% of revenue to BEE ‘enterprise development’, and

(c) Between 1 to 1.5% of project revenue to benefit local communities within a 50km radius of their renewable energy project. The precise amount of money involved is not known because each company’s commitments are confidential. However, the total amount involved is substantial, with up to R7 billion being posited.

How does all this play itself out in actual practice? McDaid’s research provides some of the answers. These include:

The overall picture to emerge from her research is one of chaos. This is hardly surprising. The companies involved are renewable energy ones; they are not ones with any necessary prior experience of either local economic development or of working with the highly segmented and frequently hostile organisations and power brokers that, to the extent that they exist at all, collectively are somehow supposed to constitute a homogenous ‘community’. Yet, without any guidance from the responsible department – the Department of Energy – on how to develop their socioeconomic plans, they are expected to do ‘something’.

Compounding these problems is that more than one company sometimes operates within 50km of each other. There are therefore often overlaps between each company’s 50km area of responsibility. Cementing the confusion is that there is no structural connection between what these companies do and the ironically called Integrated Development Plans (IDPs) that municipalities are statutorily obliged to have and update.

From the municipal perspective, the government’s abdication of its socioeconomic responsibilities to profit maximising renewable energy companies is a nightmare made worse by secrecy and lack of transparency. Municipalities have no access to what each company has committed itself. Moreover, there is no obligation on the companies to consult with municipalities and, ideally, integrate their proposals with the municipal Integrated Development Plans. Municipal ignorance – unavoidable in this case – leads to tensions with the ‘community’, which is similarly largely in the dark and doesn’t believe the councillors or officials who genuinely claim ignorance.

All these problems recur in an aggravated state when it comes to the communities themselves. In Liz McDaid’s words:

There [is] little communication, and no transparency regarding the process of how local economic development priorities would be decided, either with or without the involvement of the local municipal institutions. There is no transparent, accountable mechanism whereby the broader public is informed…The experience of communities…is that decision-making is ad hoc and manipulated by local elites and that the socioeconomic benefits are likely to be diverted into the hands of unscrupulous agents who…operate in a corrupt manner.

The following are some typical examples of what happens in practice:

  • A building labelled as a ‘skills training centre’ was completely unheard of by Cosatu (which one might have thought would have been consulted given Cosatu’s involvement with worker training). It was similarly unknown to the local Department of Labour. It turned out that a labour broker was using the building for his own purposes!
  • Given the many voices within a ‘community’, a corporation went away from a community meeting with no agreed priority list and then implemented something that wasn’t on the list at all – thereby antagonising everyone and exposing the absence of any agreed selection criteria.
  • Another corporation unilaterally erected a children’s play space on a remote sports field. The remoteness made it unsafe for both children and mothers, thereby making useless this particular ‘community development’.

The socioeconomic development problems are trifling when compared to those encountered in setting up the Community Trusts empowered with the management of up to 5% of the companies’ shares.

The two examples below typify what is happening:

  • A supposed Trust Office turned out to be an empty building run by a family member of the head of the Trust;
  • Upgrading a hotel belonging to a senior member of the renewable energy company was passed off as a community project endorsed by another Trust.

McDaid’s sobering conclusion is that:

The research failed to uncover any trusts that….were operating in a manner that complied with good governance.

Her findings are similarly stark when it comes to jobs and the creation of local industries:

  • Of the 10,814 operational jobs quoted by the Department of Energy, only 463 were South African;
  • Of the 300 local jobs promised in one case, only six materialised;
  • Working conditions were poor;
  • The extensive use of Labour Brokers and sub-contractors contributed to labour unrest;
  • There is little skills transfer, and
  • There is little local content, with BEE intermediaries being used to import products, despite stringent regulations.

All this raises the big question: Is there an alternative? If none of the above is surprising, as it flows all too predictably from the logic of privatisation embedded in the realities of South Africa’s current political economy, are there any other options? The question is critical because, if climate change allows a future, that future has to be renewable energy.

The reversal of the government’s privatisation of renewable energy would be an immediate answer. Downscaling the size of individual projects while increasing the total amount of energy produced – thereby learning from Germany’s most successful introduction of renewable energy – opens the door to the municipalisation of renewable energy, along with other forms of social ownership.

Let me affirm at once: The municipalities are a mess of daunting proportions. And, yes, there are already a thousand and one good reasons for tackling municipal dysfunction. Still more challenging is that municipal mayhem is but one of many things in SA demanding major change. Parliament, for instance. Yet, mercifully, despite its problems, there are only a few voices calling for the abandonment of Parliament.

That a task is daunting is no good reason for just accepting the status quo and, as a consequence, having to suffer the frustrations of seeking to work around the problem. Climate change is far too important to accept these opportunistic and short-term adaptations. DM

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