Thread by @FrancisBJackson

After a couple of years working to capture the local opportunity in the renewable energy value chain with industry, government, labour & civil society, I'm looking to go back into business. Here are a selection of the things I've heard and learned, in case they're useful: 🧵../13

There are multifaceted challenges & hence it requires a systemic multi-pronged approach. This means looking at one part of the solution you may find it doesn’t directly address your part of the problem. Need to look at solutions holistically to find your concern addressed - 1/13

There are as many different perspectives as there are stakeholders. They share the desire for what is best for South Africa, mapped to what is best for their business or their constituents’ priorities. See above re a systemic approach and below for some of the trade-offs - 2/13

A sustainable local manufacturing industry requires diverse offtake: government procurement (e.g. #REIPPPP), private sector procurement (e.g. <100MW) & export. The latter two require competitiveness. Market protections / import substitution are only helpful in the short term 3/13

Market certainty is necessary & nebulous. Trust in IRP implementation peaked at BW4 & requires rebuilding. It is built on several factors & investors must define its required form. Is it X many #REIPPPP rounds projected / RFP rules upfront / Ministerial determinations...? 4/13

Things learned from earlier rounds:
a) Preferential procurement does motivate more local content; and
b) Scoring on percentage of CAPEX tends to lead to BoP being maximised and then incentivises increasing relative value of BoP bid. A solution could be to score on points. 5/13

Economic multipliers give value-add where components are locally manufactured. This value is higher than the cost within the range of premium expected on most parts, indicating net positive impact on the economy. Mechanisms must put downward pressure on any premiums over time 6/

While manufacturing capacity is not yet in place, designations introduce a deadlock: it's tactical for bidders to ensure there remains too little capacity so as to get exemptions i.e. to wait until the last minute, rather than proactively build capacity in the supply chain - 7/13

Preferential procurement enables ramping up at industry's maximum pace. The more competitive, the faster. The amount of local content will match the amount that can be delivered and those who can deliver the most at the lowest tariff will win. Capacity grows round on round - 8/13

It is not very useful to audit existing manufacturing capacity. That premises that the future amount of local capacity can be perfectly prescribed & enforced. Rather incentivise bidders to develop their value chain & secure private-to-private commitment with suppliers - 9/13

The argument that some components are not competitive to produce locally is moot in two ways:
a) Where there is a level playing field – i.e. all bidders are required to have local content and all hence have the same cost base; and
b) See (6/n) above about net value add
-10/13

What about growing private sector offtake? Mines and major corporates project project >5000MW privately procured by 2030. Operation Vulindlela aims to unlock this. It can contribute market certainty. Measures to increase local competitiveness will enable serving this market 11/13

We need max speed roll-out of new capacity alongside growth of local content. It is not local content that would slow down the roll-out, it is deadlocks in procurement caused by a compliance- rather than a competitive- mechanism (see 7/n above).
12/13

Enabling industry to identify their areas of niche competitiveness is preferable to imposing component-specific prescribed local manufacturing. This can be achieved combining preferential procurement with a scoring system with which bidders can choose their scoring strategy 13/13

If you found these useful, please let me know and follow @FrancisBJackson. I look forward to hearing what you think.