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Getting labour components right is critical to success of the REIPPPP

The South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) offers a sustainable solution to the country’s current power problem. However, it has already faced delays, with an extension of financial closure for the successful bidders from Bid Window 5 until the end of March 2022.

The biggest challenge of the REIPPPP projects is that all the new solar and wind farms are located in rural and traditionally under-served areas. Image credit: Seagull | Pixabay

The biggest challenge of the REIPPPP projects is that all the new solar and wind farms are located in rural and traditionally under-served areas. Image credit: Seagull | Pixabay

The process of budgeting and costing for every component from start to finish is complex, and labour is a critical element of this costing. Getting the labour component right from the outset sets up these projects for success, and having a people partner throughout the process is hugely beneficial.

Challenges of sourcing in underserved areas

The biggest challenge of the REIPPPP projects is that all the new solar and wind farms are located in rural and traditionally under-served areas, which means there is typically a lack of skilled and semi-skilled artisans available. Regulations state that suppliers must, however, give preference to the local community for any available role, and they need to be able to demonstrate that an attempt was made to source locally before bringing in outside skills.

Unskilled labourers must therefore come from surrounding communities, but this is made more complex by quota systems that are developed by ward counsellors and community leaders. Often, IPPs will not be able to employ more than one skilled or semi-skilled labourer per household, or two unskilled labourers.

Wage problems

Adding to the existing challenges is the fact that there is a minimum wage increase effective from the 1st of March 2022 that will undoubtedly affect budgeting. If the project is deemed to fall under the Basic Conditions of Employment, there is a significant increase that needs to be factored into the budget.

These increases with regard to labour have already been gazetted, and they will affect the IPP projects. The challenge now is for IPPs to budget effectively and maximise labour costs, while achieving the required overall 40% localisation, and without escalating the cost per kilowatt to generate electricity.

Sustainable communities

Aside from sourcing labour for immediate projects, there is also the sustainability angle to consider. Projects of this nature do not come into these rural, underserved communities often, so to create sustainable upliftment in these areas is essential for economic growth. Upskilling people in areas such as entrepreneurship, basic business skills like accounting and finance, and softer skills like communication, can be hugely beneficial in the long term.

It is imperative to help these communities become more economically active and self-sustainable, uplifting whole areas rather than providing only specialised skills that will become redundant once the IPP projects are complete. Not only is this social economic development mandated by law, but it is also in the best interests of the country as a whole.

People partners for success

Labour is a critical component of budgeting. The key is to spend this budget in the most efficient way possible to not only maximise profitability, but also leave a positive lasting impression on affected communities.

Partnering with the right company can help to facilitate this process from the outset, with advice on budgeting to ensure that gazetted wage increases have been accounted for, right through to the pay-over of statutory costs when they come into effect.

Your people partner can also facilitate sourcing and recruitment, training, upskilling, social development and more, and will take on the human resources roles such as payroll and onboarding. This will not only smooth the process and help to maximise budget, but it will also remove a large administrative headache, enabling IPPs to focus on their core task – providing sustainable energy solutions to ease South Africa’s ongoing power problems.

This article is an opinion piece by Viren Sookhun, managing director at Oxyon.