It is no secret that local manufacturing is in a parlous state, the metals and engineering sector having shed some 50% of the jobs it provided just a decade and a half ago.
Now, with South Africa’s massive transmission development programme (TDP), we have a once-in-a-generation opportunity to not only reverse those losses but to create more than 100,000 new jobs.
The multiplier effects in terms of job creation are significant, and could make a serious dent in our daunting unemployment challenge. But local industry is very seriously concerned that this golden opportunity is about to be missed completely.
The estimated R400bn that will be deployed into the TDP execution will not only go a long way towards ensuring our energy security, but gives us a rare opportunity to revitalise industry with all of the benefits that holds for the economy. We most probably won’t see a programme like it again for another generation.
To drive implementation of the TDP, in July, the department of electricity & energy launched the Independent Transmission Projects (ITP) procurement programme. A request for prequalification under the first bid submission phase of the ITP — to build some 1,164km of powerlines and 2,630 MVA (Mega Volt-Amperes) of transformation capacity comprising seven projects — closed on Tuesday.
It is understood the ITP request for proposals (RFP) stage will be in November. Following the RFP process, successful bidders will have to own, finance, build, operate and maintain the transmission infrastructure. (Design, acquisition and ownership of the rights of way, environment and impact assessment and commissioning fall under the mandate of the National Transmission Company and are at an advanced stage).
The prequalification criteria, however, preclude local industry from participating at the outset due to the criteria’s onerous technical and financial requirements.
They require proof that bidders have successfully completed three ITP projects. This means no South African respondent can take part — for the simple reason that this country has never done such projects before. In other words, only foreign bidders would have been able to meet the requirements of the RFQ process.
This process does stipulate that successful bidders will be required to hold 49% local equity. But there’s no requirement that those holding that 49% have any manufacturing, construction or engineering capacity or experience. The way, then, is left wide open to tenderpreneurs or banks to take such stakes — with little or no real job-creating impact.
Furthermore, there are no explicit requirements for local content. At present, industry’s expectations around localisation rest only on verbal statements by the minister of electricity & energy. Without a binding localisation framework, industry is concerned that these assurances might well not translate into concrete outcomes during project execution.
From transmission lines to substations and pylons, and related equipment, we already have the expertise in our local factories
As a communication sent this week to the Independent Power Producers office by manufacturing and engineering bodies, including the Manufacturing Circle, states —and has now been publicised — South African contractors and manufacturers have the capacity to competitively bid in the RFP. They have the expertise, the installed capacity and the track record — having supplied the requirements of the existing transmission network — to meet the requirements to execute the seven projects under the ITP. And they know how to price both effectively and competitively.
SA Inc is ready to roll up its sleeves, invest in capacity and, perhaps most importantly, invest in creating the skills that will create quality long-term jobs. Local engineering, procurement and construction companies are world-class, know the local landscape much better than foreign rivals, and are fiercely competitive. From transmission lines to substations and pylons, and related equipment, we already have the expertise in our local factories.
Shutting out our local industry — including contractors and manufacturers — from this opportunity makes no economic sense whatsoever.
South Africans built the existing transmission and distribution networks, and they are more than able to competitively participate in delivery in the ITP programme and beyond, to deliver on the 14,000km of much-needed transmission infrastructure that we require over the next 10 years.
Unlike foreign bidders, they are able to build out our industrial policy, create jobs and — with the industrial base that will be created through this exercise — establish an empowered export-oriented sector that can compete internationally. To the benefit of us all.
• Philippa Rodseth is the executive director of the Manufacturing Circle
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