Latest / TIPS Podcast / Interview: Senior Economist, Gaylor Montmasson-Clair on SAREM

Transcript

Interview: Senior Economist, Gaylor Montmasson-Clair on SAREM · TIPS Podcast

• 0:08
  SPEAKER_00: Welcome to another episode of the Trade and Industrial Policy Strategies official podcast.
• 0:16
  SPEAKER_00: The show where we delve into the fascinating world of economics and its impact on global development.
• 0:25
  SPEAKER_00: I am your host, Nondre Matchandana, and today we will discuss some of the very ambitious targets of the South African Renewable Energy Master Plan, which is aimed at driving the industrialization of the renewable energy value chain by 2030.
• 0:45
  SPEAKER_00: In this session, I am sitting with Gaylor McMaster Claire, a senior economist at trade and industrial policy strategies and the facilitator of SARM, who will try to unpack the vision, key objectives, and pillars of the master plan.
• 1:05
  SPEAKER_00: Welcome, Gay Lor.
• 1:07
  SPEAKER_01: Hi every way.
• 1:08
  SPEAKER_01: Thank you for having me.
• 1:09
  SPEAKER_00: Lovely.
• 1:10
  SPEAKER_00: In your own words, Gay Lor, what is this document that industry has been anxiously waiting for?
• 1:17
  SPEAKER_01: The SARM, the South African Renewable Investor Plan, is a framework to drive the industrial development of South Africa's renewable energy and battery storage value chain.
• 1:34
  SPEAKER_01: Basically, it starts from a simple premise.
• 1:37
  unknown: The renewable energy and battery storage industry is booming globally and in South Africa.
• 1:44
  SPEAKER_01: But if we look at the growth pattern in the country, we see that it is fueled largely by imports.
• 1:52
  SPEAKER_01: Imports of panels, imports of turbines, inverters of batteries, and of many components that go into a solar, a wind, or a battery plant.
• 2:03
  SPEAKER_01: That is exactly where SARM comes in, to say we see the growth in the market, but we also notice that it is fueled by imports.
• 2:13
  SPEAKER_01: So how can we as a country develop our own industry and supply this domestic demand with the products that are necessary, as well as where we are competitive, tap into export markets in the rest of the continent and more broadly.
• 2:30
  SPEAKER_00: And how exactly would you say SARAM will foster this demand for the energy and storage technologies?
• 2:37
  SPEAKER_00: So SARM recognizes that any ambition around industrialization in this particular value chain depends on demand.
• 2:46
  unknown: To put it simply, no demand, no industry.
• 2:49
  SPEAKER_01: So getting as much demand as possible is a precondition for the ambition of the mass supply.
• 2:55
  SPEAKER_01: And we've been quite explicit that when it comes to supporting demand, the first thing is to get a clear pipeline of both public and private sector demand, large scale, small scale.
• 3:08
  SPEAKER_01: And so we need to address the cross-cutting issues that in the demand at the moment.
• 3:13
  SPEAKER_01: And that starts with, of course, the physical infrastructure, the grid, but also the market infrastructure, things like the frameworks for trading, wheeling, tariffs, licensing applications, the ability for people to feedback, for instance, into the grid and sell to their municipal supplier or to S company.
• 3:33
  SPEAKER_01: And we need to unlock a much broader demand.
• 3:36
  SPEAKER_01: If we are honest with each other, the rollout of renewable energy today globally, but also in South Africa, is booming, yes, but it is limited still to a very small part of society, particularly in South Africa.
• 3:50
  SPEAKER_01: And so we need to put forward clear intervention to broaden that rollout, particularly to small businesses, but also to low and middle-income households.
• 4:02
  SPEAKER_01: And if we broaden that pool of demand and we are addressing the uh injuring factors in the grid, in the policy framework, in the regulations, and we are very clear about the pipeline that we have going forward through ongoing public procurement and of course ongoing private procurement, then we would have sufficient demand to effectively underpin the ambition of SARM.
• 4:27
  SPEAKER_01: Just on to finish, we know that as a country, we need six to eight gigawatts of renewable energy per year for the foreseeable future.
• 4:37
  SPEAKER_01: That's about 50 to 60 gigawatts of renewable energy to be rolled out over the next few years.
• 4:42
  SPEAKER_01: Our ambition from SARM to industrialize, we say we can do it with three, three gigawatts per year, ramping up to five.
• 4:51
  SPEAKER_01: What's important is that this demand is consistent, continual, and ongoing.
• 4:57
  SPEAKER_01: That it's every year, and that it's not just stop start, goes up and down.
• 5:02
  SPEAKER_01: So you can see that we can actually achieve industrialization.
• 5:06
  SPEAKER_01: We don't need even the quantum that is required for the country to achieve energy security to be successful on industrial development.
• 5:13
  unknown: Of course, if we can achieve a six to eight gigawatt per year, that would be fantastic.
• 5:17
  SPEAKER_01: We need that as a country, and we could achieve a lot more industrialization going forward.
• 5:21
  SPEAKER_01: But even with three to five gigawatt per year, we can do meaningful uh industrialization in the value chains.
• 5:29
  SPEAKER_00: Um, yeah, speaking of that opportunity by the government to show urgency, do you think they have been able to take advantage of some of the booms in, say, solar panels and other renewable technologies, or do you think they have not really been able to that urgency?
• 5:47
  SPEAKER_01: So I think there's been a lot of development in the space over the last few years and some really important policy reforms that have really unlocked the space.
• 5:57
  SPEAKER_01: First, we've seen some opening up of the private sector market.
• 6:03
  SPEAKER_01: Licensing requirements were significantly loosened in 2021, fully removed in 2022, and that has led to a significant pool of investment from the private sector into renewable energy.
• 6:19
  unknown: Primarily a lot of the big firms in the mining sector, but really across the board.
• 6:25
  unknown: And so that has really shown some really great results.
• 6:29
  unknown: We've also seen some important developments when it comes to small-scale projects.
• 6:35
  SPEAKER_01: Uh, certainly we have an increasing number of municipalities that welcome small-scale projects onto their municipal grid, and some even buy that power back, the excess power back.
• 6:49
  SPEAKER_01: And many government entities have also started their own program to roll out small-scale projects on their rooftop, and that's across the board, from national to provincial to local government, and even some state of enterprise.
• 7:02
  SPEAKER_01: Where we do need to see more urgency and more consistency is on the large-scale public procurement program, which has been driving the industry historically and was very effective at that from 2011 to 2015.
• 7:15
  SPEAKER_01: The program was then Armstrong from 2015 to 2019.
• 7:19
  SPEAKER_01: And since it restarted, it has been in a bit of an uphazard fashion, and we need more consistency in that rollout on a yearly basis to serve as anchor demand for the sector specifically.
• 7:33
  SPEAKER_01: So, you know, I would say lots of developments which go into the right direction, but we need more consistency and more regularity in the work that's being done to make sure that effectively we really have as much demand for renewable energy as we possibly can.
• 7:51
  SPEAKER_00: Do you have any notable renewable energy projects that have come in from the market, either in the private or public sector, or any case studies of local companies leading this innovation in this technology?
• 8:05
  SPEAKER_01: If we look at the data that's coming out of ESCOM around mid-year, we saw that there were up to 13, 1,3, 13 gigawatts of projects, large-scale projects being developed by the private sector.
• 8:20
  SPEAKER_01: And so that really shows you the appetite from all the mining companies.
• 8:26
  SPEAKER_01: Certainly, you know, we've seen some significant projects from companies like Anglo American, you know, SASO, Sebany Gold, Seriti, and many others who are all rolling out renewable energy and all have very ambitious plans to roll out significantly more going forward.
• 8:48
  SPEAKER_01: And of course, it expands way beyond the mining industry.
• 8:51
  SPEAKER_01: We see that at the moment in every single sector: uh steel, aluminium, shopping malls, property management, you know, light manufacturing, automotive industry, everyone literally is now rolling out renewable energy projects.
• 9:10
  SPEAKER_01: So we need to make sure that we harness that to support our local value chains, and that again is where you know SAREN comes in.
• 9:18
  SPEAKER_00: Um, I like that you speak about the different stakeholders involved.
• 9:21
  SPEAKER_00: I understand with your public engagements with this document, you mentioned that it is a social compact.
• 9:28
  SPEAKER_00: How comprehensive has your consultation been with the various stakeholders to ensure the success of this plan?
• 9:35
  SPEAKER_01: Yes, we said it it's a social compact, and that's really important.
• 9:39
  SPEAKER_01: You know, um, master plans are not government documents, they are social compact between government, business, and labor.
• 9:47
  SPEAKER_01: And SARIM is no different.
• 9:49
  SPEAKER_01: And so at the end of the day, it has to be endorsed by the social partners.
• 9:53
  SPEAKER_01: To make sure that you know we have everyone on board, we had a very inclusive process to get to a final document.
• 10:00
  SPEAKER_01: We ran quite a lot of different test teams on each of the key pillars of the plan.
• 10:07
  SPEAKER_01: These made up representatives from government, business, labor, and even civil society and key experts.
• 10:13
  SPEAKER_01: This test team fed deeply into the work of SARM.
• 10:17
  SPEAKER_01: We had a wide range of bilateral engagements with more than 200 different stakeholders to inform as well the drafting process.
• 10:30
  SPEAKER_01: In addition to that, we ran a public comment process in July and August of this year, where we released a draft for public comment.
• 10:41
  SPEAKER_01: We received over 80 submissions across government, business, labor, and civil society, and even some members of the public.
• 10:50
  SPEAKER_01: These were extremely helpful in enriching the document and clarifying the mandate of SAREM and making sure that again everyone is on board.
• 10:59
  SPEAKER_01: We also had a number of tunnel sessions online, but also in person, in Mkumalanga, in the Northern Cape, in the Eastern Cape, and that also enriched the document.
• 11:20
  unknown: And so you're now starting to get the feeling that you know we've been very intentional in consulting as much as we can, but also including everyone in the structures that have been driving and shaping the plan.
• 11:32
  SPEAKER_01: And I must say that has been really a big strength of the plan in really making sure that everyone is involved as an opportunity to contribute.
• 11:43
  unknown: And we also saw it in the definition of the targets for the plan.
• 11:48
  SPEAKER_01: When we set to put forward targets for the master plan, we were very clear that these would have to be negotiated by those that have to sign the plan at the end of the day.
• 11:57
  SPEAKER_01: That's government, business, and labor.
• 11:59
  SPEAKER_01: And so we facilitated a process to reach those targets.
• 12:02
  SPEAKER_01: And again, I think it brings consensus, it brings uh support, and uh, and I think you know we've run a very open and transparent process when it comes to development that you know everyone will find what they need and want uh in into the into the final document.
• 12:19
  SPEAKER_00: I'm sure with you mentioning some of those trends, what has been some of your key stumbling blocks or challenges to the renewable energy optimization plan?
• 12:30
  SPEAKER_01: So I think one of the challenges in developing SARM is that the energy space in South Africa is busy.
• 12:37
  SPEAKER_01: It is busy, it is moving very rapidly.
• 12:39
  SPEAKER_01: There are a lot of stakeholders, a lot of developers, because of course of the energy security concerns that we have in.
• 12:46
  unknown: And so that makes the space very fluid.
• 12:48
  SPEAKER_01: And so, in developing the plan, um, we've had to keep abreast of all developments, aligned with a significant number of stakeholders, and you know that hasn't been easy because there are many issues that are core to SARIM but are under the leadership or the control of other stakeholders, and so alignment has been really important.
• 13:09
  SPEAKER_01: Secondly, the renewable energy industry and the battery storage industry effectively is made up a lot of different sectors.
• 13:17
  SPEAKER_01: Again, a very large number of stakeholders involved because you have the companies that develop the projects, you've got the original equipment manufacturers, the OM that brings some of the key technologies, you've got the companies in the value chain, tier one and tier two firms, you've got the off-takers, the ones that buy the power, which of course historically has been ESCOM, but now we have the private sector, and we have the whole ecosystem around that, in terms of manufacturing related services, in terms of you know construction and civil engineering, the policy in regulatory landscape.
• 13:52
  SPEAKER_01: So, again, it cuts across many industries.
• 13:56
  SPEAKER_01: It's not clear-cut when we talk about you know the renewable energy value chain, it's not a specific sector.
• 14:05
  unknown: You go across steel, cables, inverters, you know, and many, many, many products.
• 14:12
  SPEAKER_01: So that has been a bit of a challenge, of course, in making sure that we include all the necessary aspects, but we also have some clear boundaries about what we cover and what we do not.
• 14:23
  SPEAKER_01: So that has been a challenge.
• 14:25
  SPEAKER_01: The third issue for me has been staying within the mandate, has been difficult.
• 14:30
  SPEAKER_01: Because of the need to achieve energy security and the need to address a lot of issues around this, particularly energy access, energy poverty.
• 14:40
  SPEAKER_01: Many stakeholders want SARE to have a much broader mandate than what it is designed for.
• 14:46
  SPEAKER_01: And so SAREM is focused on industrial development, and that is the mandate that we have, and that is the mandate that we have to stick to.
• 14:53
  SPEAKER_01: And so managing expectations around this has been difficult at times, but we are staying true to our mandate and focus on this because this is the only way that we can actually be effective and have an impact.
• 15:07
  SPEAKER_01: Not that the other issues that we're not covering are not important, some may argue they may even be more important, but they're just not within the mandate concern.
• 15:17
  SPEAKER_01: And so we are focusing on that.
• 15:20
  SPEAKER_00: Would you say another big anxiety that has come out has been the drive out of carbon-intensive economy is the question of jobs.
• 15:28
  SPEAKER_00: What are some of the proposals to support building capabilities and closing the skills gap?
• 15:34
  SPEAKER_01: Yes, of course, you know, and aside from context, employment is always core.
• 15:40
  SPEAKER_01: And building the capabilities in the country is one of the core pillars of SARI.
• 15:46
  SPEAKER_01: We've got the demand, we spoke about that.
• 15:49
  SPEAKER_01: We've got the core of the master plan, which is around inclusive industrial development of the value chain, around the core trade and industrial policies that are required and the transformation policies that are required.
• 16:02
  SPEAKER_01: And then we have the capabilities around the skills, but also technology readiness.
• 16:09
  SPEAKER_01: And we've put a lot of emphasis on building those skills.
• 16:12
  SPEAKER_01: We've got some core interventions.
• 16:14
  SPEAKER_01: One of them is a matchmaking platform that we're calling power up between industry and education providers, education and training institutions to make sure that the skills that are coming out of the education system match effectively what industry requires.
• 16:32
  SPEAKER_01: Of course, in volume, but importantly here as well in quality, in terms of the competencies and the skills that are required.
• 16:40
  SPEAKER_01: And that vice versa, there is the beginning of building a pipeline for graduates, you know, for professionals, for those that come out of the education and training institutions onto the labor market.
• 16:52
  unknown: And so we've paid a lot of attention to that, also around the activation of skills, particularly around internships, learnerships, apprenticeships, and other programs to make sure that again there's an increased number of opportunities for those graduates and to enter the labor market and gain experience.
• 17:11
  SPEAKER_01: We've also been looking at how we can recognize prior learning for a number of professionals that are already in the sector but not necessarily have the qualification, formal qualification.
• 17:23
  unknown: And so that's important to bring that to the fore.
• 17:26
  SPEAKER_01: So we've been quite intentional around the need to build skills and the right kind of skills, and also looking at you know technical skills, of course, but the softer ones as well, so that it's across the board and all levels, you know, from the artisans, uh, technical skills, all the way to, of course, engineers and the broader ecosystem of skills around policy, regulation, you know, uh markets, and many others.
• 17:57
  SPEAKER_00: So, I mean, sounds interesting and exciting, but what can you make us understand?
• 18:03
  SPEAKER_00: Reafired was just a quick summary of some of the preliminary set of SARM targets or the very next implementation steps.
• 18:12
  SPEAKER_01: So we're now at a point where we've put together the master plan, we've established the targets for the master plan, we've identified the key localization opportunities that we think we can pursue, and the next step really is to launch, sorry, is to get it out, and it is not a mundane step because the launch really then provides the mandate for implementation.
• 18:41
  SPEAKER_01: It is when we launch, and that we have government, business, and labor signing on the dotted line, taking the picture, shaking hands, and saying, we all agree on SARM, we give you a mandate.
• 18:54
  SPEAKER_01: Please now go and implement, and that is really the next step for us.
• 19:00
  SPEAKER_01: And uh, we are very excited about it.
• 19:02
  SPEAKER_01: Of course, we're looking forward to the day when we can launch, hopefully, early in 2024.
• 19:08
  SPEAKER_01: And so that is really where we are right now.
• 19:11
  SPEAKER_00: Thank you for some of your insights today, Galo.
• 19:14
  SPEAKER_00: Do you have any closing remarks on SARE?
• 19:17
  SPEAKER_01: Maybe just to say that the window of opportunity for SAREM or the ambition of SAREM is now.
• 19:22
  SPEAKER_01: We see the growth of the industry globally and in South Africa, and if we try to realize SAREM in a decade, it will be too late.
• 19:32
  SPEAKER_01: Industry will be established.
• 19:34
  SPEAKER_01: So the opportunity to build an industry to put together the demand and the supply side interventions and the value chain ecosystem is today.
• 19:43
  SPEAKER_01: We need to seize it for the country and for the benefit of all.
• 19:48
  SPEAKER_00: Thank you so much.
• 19:49
  SPEAKER_00: And on that exciting note, that wraps up today's episode of Trade and Industrial Policy Strategies podcast with our expert and guest, SARM facilitator Gay Law, unpacking how the master plan will drive industrial development and foster inclusive growth.
• 20:07
  SPEAKER_00: A huge thank you to our guest.
• 20:09
  SPEAKER_00: This plan should be finalized soon.
• 20:11
  SPEAKER_00: People can reach out to you.
• 20:13
  SPEAKER_00: He's our former Twitter, X, and to our listeners, remember sustainable growth is not just a goal, but a path to a more resilient and prosperous future.
• 20:24
  SPEAKER_00: Don't forget to subscribe, leave your review, and connect with us on social media.
• 20:29
  SPEAKER_00: Remember to follow our body of research on the Tips website, www.tips.orgs.za.
• 20:37
  SPEAKER_00: Interact with this podcast on Apple Deezer Spotify and YouTube and join us next time as we continue our exploration of policies that shape economies.
• 20:47
  SPEAKER_00: Until then, I'm your host, Nando Bachinada, signing off.