SACC operations manager, Juan-Manuel Sabio

At the beginning of this year, when the state-owned Industrial Development Corporation (IDC) committed itself to spending some R25 billion on green economic development over the next five years, it started out by focusing on new and existing companies that were seeking up to R1bn to fund “relatively sizeable” renewable energy projects. By that time, the IDC had already formed a Green Industries Strategic Business Unit (SBU), which was to develop, grow and invest in green industries.

Headed by Rentia van Tonder, it was already co-funding a nation-wide solar water heater project for low-income housing, which was kick-started in 2010 and which is expected to install more than 110 000 units this year, with a million homes being the end target. It is not only looking for more, “sizeable” projects, but now for smaller projects as well.

Last month, Van Tonder and her team honed in on relatively small businesses in the energy-intensive sector when she and IDC chief executive officer Geoffrey Qhena officially launched the IDC’s R500-million Green Energy Efficiency Fund (GEEF) to promote energy efficiency (saving), energy self-generation and ‘self-use’ renewable energy projects.

In this case, they will be looking at energy-intensive businesses with revenues of less than R51m, assets of less than R55m and employing more than 200 people; and then at those in this group seeking loans ranging between R1m and R50m – projects able to shave at least 20% off an applicant’s current power consumption levels.

Initiatives eligible under Eskom’s Integrated Demand Management programmes may be eligible for GEEF support, and include those seeking bridging finance to address the funding gap between making the actual investment and receiving the Eskom rebate or incentive.

When Van Tonder spoke at a well-attended press conference, 10% of the GEEF’s value had already been allocated to projects, which ranged from a rooftop solar photovoltaic installation at a Cape Town clothing and textile producer, to co-generation and solar water heating schemes at chemicals and financial services companies, respectively. A flood of applications was expected after the launch, she added.

The GEEF launch came a day after the government officially released the National Climate Change Response Policy, which was endorsed by Cabinet on 12 October 2011. The policy gives South Africa’s key carbon-emitting sectors two years to finalise ‘carbon budgets’ that are calibrated to the country’s objective to reach a peak in yearly emissions by 2025, and thus enable the country to begin reducing the production of greenhouse gases from 2036 onward.

Industry sectors and sub-sectors will be required to formulate mitigation and low-carbon development strategies, in which a suite of mitigation programmes must be outlined and then monitored. During the same period, the government would undertake to design and publish a draft Climate Change Response Measurement and Evaluation System based on domestic measurement standards, which would need to be adapted to any emerging global measuring, reporting and verification requirements.

According to Water and Environmental Affairs Minister Edna Molewa, the policy has been canvassed broadly for public and private sector comment. The government would consult actively with industry on the development of the carbon budgets to identify an “optimal combination” of mitigation actions at the least cost to, and with the most sustainable development benefits for, the affected sectors and the economy as a whole, she promised.

The GEEF launch came at the same time as some firms are struggling to absorb the financial impact of increasing electricity costs, with some now opting for cheaper alternatives that will be able to sustain their revenue momentum in the long term.

To demonstrate the latter, the IDC had taken journalists from Sandton to Newcastle a few weeks earlier to visit the plant of South African Calcium Carbide (Pty) Ltd (SACC), Africa’s only producer of calcium carbide. This product is used in the desulphurisation of steel and in the production of acetylene, which is mainly used in the welding industry.

Also one of South Africa’s leading energy-intensive companies, SACC was running at only 70% of capacity due to electricity constraints, which limited it to 50 megawatt-hours of electricity, or half of Newcastle’s power capacity.

According to SACC operations manager Juan-Manuel Sabio, with a 10-year loan from the IDC the company will be building an eight-megawatt energy co-generation plant at a cost of R105m to bring it back to the full capacity of 100 000 tonnes of calcium carbide per year by October next year – sparing it from Eskom’s forecast national deficit of 1 000MW in 2012/13.

Van Tonder added that implementation of the co-generation facility will have a positive developmental impact on sustainable employment in the area, resulting in the creation of 100 new temporary jobs during the 18-month construction phase and six new permanent jobs during the operational phase.

Furthermore, the plant has been registered as a Clean Development Mechanism project, which will make it eligible for about 450 000 carbon credits over the payback period, with revenues going toward repaying the IDC loan.

Following the completion of the co-generation plant, SACC has another green project in the pipeline. According to Sabio, it plans to capture quality carbon dioxide and supply South Africa’s food and beverage industry with compressed air.

He indicated that SACC would again enter discussions with the IDC around funding for the second project, with IDC green industries specialist Raoul Goosen commenting that the institution would be happy to fund projects that assisted high-energy intensive industries to beneficiate products more efficiently. He confirmed that part of the SACC loan was funded from the GEEF.

GEEF is backed by German development bank, KfW, which has extended a €48-million long-term loan to the IDC at prime less 3%.

GEEF, in turn, will extend loans to applicants at prime less 2% over a maximum tenure of 15 years, depending on the technology being deployed.

KfW was represented at the launch by the first counsellor for economic co-operation and development at the German Embassy in Pretoria, Stephan Klaus Ohme, who said KfW not only had the finance but also the necessary clean technology experience to assist applicants. This included the completion of energy assessments and the selection of the most appropriate technologies. It had supported the rollout of renewable energy and energy-efficiency programmes in Europe and in the rest of the world.

He confirmed that Germany, and German companies, were keen to participate in South Africa’s clean energy programme to procure 3 725MW of renewable energy from independent power producers between 2012 and 2016; and that the loan supported South Africa’s internal green economy policies as outlined in the New Growth Path and the Industrial Policy Action Plan.

Peer pressure

Africa, a country currently heavily reliant on coal for power, is under pressure to reduce its carbon footprint and greenhouse gas emissions – and switch to a greener, cleaner energy mix that is less reliant on expendable fossil fuels such as coal from Newcastle, where the road network is under heavy reconstruction after being damaged by coal trucks.

The IDC’s funding will help support the Department of Energy’s Integrated Resource Plan (IRP), which maps out how South Africa will double its electricity supply capacity over the next 20 years.

According to the IRP, renewable energy will supply as much as 42% of the country’s power in the future; nuclear 23%; coal 15%; and a small amount of gas and hydro making up the difference.

The IDC will be supporting renewable IPP projects to be sourced from the R25-billion allocation announced earlier this year.

According to brochures and the IDC’s website, the specific sub-sector focus areas of the Green Industries SBU are non-fuel based green energy (for example, renewable energy); energy efficiency and demand side management; emission and pollution management; fuel-based green energy (for example, waste to energy and co-generation); and biofuels (mainly bioethanol).

Van Tonder’s SBU says it will consider funding for:

• Fixed assets and working capital;
• Greenfields, expansions and rehabilitations;
• Relatively sizeable projects;
• Projects that exhibit sustainable economic merit; and
• Projects with significant developmental impact – particularly sustainable job creation, the creation of exports, value addition, empowerment and rural development.

While each proposal is carefully considered, the SBU will give preference to projects that demonstrate economic merit; show profitability and sustainability within a reasonable time frame; and greenfield projects, expansions and rehabilitations, as well as relatively
sizeable projects.

“Applications must be made in writing, with an executive summary and a business plan,” according to the IDC website. ☑

Udo Rypstra

Rypstra is a publisher and editor at “Transport & Tourism News”, freelance photojournalist and owner of Prestige Media Productions.

He can be contacted via e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .