South African Business 2016 edition

INTERVIEW Plenty of

INTERVIEW Plenty of scope for solar Annelize van der Merwe, the Director of the Green Economy for Trade and Investment South Africa, a division of the dti, discusses the potential for investment into solar energy in South Africa. In terms of solar power, there is definitely still scope for more investment into the glass industry, perhaps through partnerships with our local manufacturers. South Africa’s sand has a very high iron content which means that the sand is less suitable to use in the manufacturing process for PV glass. Our glass manufacturers would therefore need to invest in the technology to extract the iron from the sand before they can manufacture it into glass specifically for the solar industry–and that requires a significant capital investment. We are encouraging companies to look at partnerships and I think there is still scope for module manufacturers, especially given that sub-Saharan Africa is now waking up to the potential of solar energy and there are all these opportunities for off-grid solutions in many African countries. There are tremendous opportunities in terms of infrastructure, but the commercial and industrial rooftop market actually also provides many opportunities for module manufacturers — especially in light of the fact that the dti is in the process of designating PV panels for local content for public procurement. We also see opportunities for the glass industry in other areas such as coating the glass for the heliosats for the CSP (concentrating solar power) industry. When it comes to parabolic trough technology where the glass must be slightly bent, that is quite an expensive process and there is a need for investment there. One of the challenges the industry faces with manufacturing for the CSP industry and especially the parabolic trough technology is policy certainty in terms of the rollout of solar projects. Companies need to be certain of market (which translates into a certain amount of MWs) to be able to justify large capital investments into component manufacturing. We want the public and business to know that we can do unblocking, that we have funding and incentives available. We want to know if companies are facing problems or if there is anything that is hampering a company’s ability to grow because a large portion of investment comes from domestic investors wishing to expand their loal production. Incentivising investments Our dti incentives are generally quite well known, because it’s a cash grant, but our tax incentives are less well-known. The majority of our investments are in medium to large companies, but increasingly SMMEs are getting involved in innovative areas–you have small companies perhaps providing solutions or making something more energy efficient as well as the guys who would install PV solutions on rooftops. In my sector, which is renewable energy, I have not dealt with that many projects that have wanted to accept any extra funding. The type of projects we get involved in would normally be funded by the IDC–often they would take equity in the company and then help them to arrange further finance. A lot of the projects we deal with are companies that already have their own corporate finance and they have a good balance sheet, but the problem with smaller companies is that many times these smaller entitites have no finance available–they have a project but it’s not bankable. That’s what we find with a lot of companies, especially BEE companies who don’t have funding, and that can sink a project because you have someone who is prepared to take some SOUTH AFRICAN BUSINESS 2016 144

INTERVIEW equity but you also have to have something of your own or you need to bring some available funding from your side. Also very often companies need money for operational costs and our incentives don’t stretch to that so we will give funding for the assets but companies need to bring their own funding to the deal as well. In terms of wind energy, in talking to some international companies we have realised that our key enablers (something that would enable us to attract more investment into component manufacturing for the renewable energy sector) cross-over between the wind industry and the automotive industry and this could count in our favour going forward. On the waste side there are still opportunities in tyre recycling, so we are looking for companies that can recycle tyres effectively. REDISA will endorse a project, but often those projects need financing or other investors involved in order to make it happen. REDISA will then refer some of those companies to us to take those projects further. We are getting in a huge amount of interest from companies as well as for waste-to-energy is policy certainty. However, you also have to appreciate that with the roll-out going forward, companies need long-term sustainability before they decide to setup a R300-million factory. They need orders first as blade manufacturing represents a huge capital outlay. It is very expensive and requires a massive facility. We are talking to some blade manufacturers and then there are some smaller components that go into the motors, the nacelles and the gearboxes and such,but those need even a bigger market to justify setting up manufacturing facilities in SA. There is some scope for a type of projects, especially companies using industrial waste. We have companies in the paper industry, fxor example, who want to take the pulp that they produce as a byproduct and convert it into steam. Projects like that are becoming increasingly interesting. In the agriculture industry all the packhouses and cooling facilities want to install PV in order to supplement their energy supply and to provide a backup during load shedding, so that is creating interesting opportunities, but we can’t keep up with the amount of companies looking to upgrade or invest in their area. 145 SOUTH AFRICAN BUSINESS 2016