localisation opportunities in manufacturing value chain

Localisation Opportunities in Manufacturing Value Chain

WELCOME AND INTRODUCTION

WELCOME

Welcome to the “Developing the Local RE Value Chain” Live Webinar 2021

SOCIAL MEDIA HASHTAGS

#DLVCwebinars2021#RenewableEnergy#LocalContent#buildbackbetter with #renewableenergy#localforglobal#sapvia#sawea#energytransformation#projectdevelopmentNtombifuthi Ntuli

SAWEAChief Executive Officer

AGENDA AND SPEAKERS

Introduction and Welcome – Ntombifuthi Ntuli (SAWEA)

Local content requirements in the REIPPPP programme – Gerhard Fourie (DTIC)

Overview of Industry Perspectives (Solar) – Maloba Tshehla (ED Platform)

Overview of Industry Perspective (Wind) – Daniel Erasun Mora (GRI Towers SA)

Local Content and the Verification Process – Desmond Govender (Global Certification Solutions)

Spotlight: ENERTRAG South Africa (Pty) Ltd (Lehlogonolo Mohlala)

Q & A – Niveshen Govender (SAPVIA)

Closing Remarks

LOCAL RESOURCES – GLOBAL COMPETENCE

SAPVIA and SAWEA, in partnership with BEPA, IPPO and REEF(SA) present thefirst webinar as part of the six-part series of workshops to address key areasthat aspiring developers need to understand.

Understanding the essential elements in the framework of renewable energyproject development to provide sufficient support and ensurefavourable conditions for success.

As the representative voices of the solar PV and Wind industries we areconstantly working towards collaborating with stakeholders across therenewable energy sector to share knowledge and drive effective change.Developing South African developers to build local competence of globalstandard, is key in accelerating the local renewable energy market.

IN PARTNERSHIP WITH

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LOCAL CONTENT REQUIREMENTS IN THE REIPPPP PROGRAMME

GERHARD FOURIEDTIC

Gerhard is the Chief Director Green Industries in the Industrial Competitiveness andGrowth Branch. His previous roles have been in Policy Development, AdvancedManufacturing, Information and Telecommunications Technology, Trade and InvestmentSouth Africa and the Board on Tariffs and Trade (now ITAC).

Gerhard’s educational qualifications include a Masters Degree in Business Administration(MBA) (UP); BCom (Economics) (UP); Certificate in Business Sustainability Management(Cambridge); Diploma in Mechanical Engineering; Certificate in Customs Affairs; SAP R/3Application Consultant and Advanced Certificate in Information Systems Management.

The purpose of the Green Industries Chief Directorate is to design (this includes alignment)and implement policies, strategies and programmes to promote economic growth, jobcreation and transformation that are presented by the unique opportunity of structuralchange towards a green economy. This structural transformation presents many newopportunities in the areas of energy generation, transmission and distribution; transport;logistics; manufacturing; the circular economy (repairs, refurbishment, upgrading,recycling); water and sanitation; and the convergence of technologies such as telecoms, ITand electricity. Over the last few years the environmental responsibility of industriesbecame a new element of global competitiveness that literally can open or close access tonew and existing markets and funding and investment streams.

Local content requirements in the REIPPPP programme


CONTENT

• Why localisation and industrialisation?• Levers available to Government• Challenges• Way Forward


THE SOUTH AFRICAN GDP GROWTH (1994-2020)

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Source: South African Reserve Bank Quarterly Bulletin

Increase Government and private spending on goods and servicesReduce importsIncrease exportsInvestment

Local content in South Africa

➢ Government purchasing power through public procurement contributes approximately 20% to GDP (value

that is extracted from large scale procurements).

➢ According to the World Bank, imports of goods and services in South Africa accounted to 29.35% of

GDP in 2019.

➢ Industrial Policy interventions are critical to up scale production capacity in the manufacturing sector and

to support growth.

➢ On the 7th December 2011, Local Content became a legislative requirement through the amendment of

the Preferential Procurement Regulations (PPRs.). The PPRs were further amended in 2017.

Industrial Policy Objective wrt Local Content Requirements

Leverage public expenditure, both CAPEX and OPEX, made by organs of state (all spheres ofgovernment and SOCs) to:

o Develop and enhance local manufacturing capacity and capabilities

o Support industrial innovation and technological developments

o Create employment and sustain jobs

o Boost exports and ensure suppliers are integrated into OEMs global value chains

o Support broader economic empowerment through the creation of black industrialists

Supply Side Levers Available to Government

➢ Import Tariffs

➢ Anti-dumping duties

➢ Import Control

➢ Standards

➢ etc

Procurement Levers in the South African Public Procurement System

➢ Government purchasing power through public procurement contributes approximately 20% GDP (valuethat is extracted from large scale procurements).

➢ National Industrial Participation Programme (NIPP): Imported Content => US$10 million.

➢ Defence Industrial Participation (DIP): managed by Armscor and applicable to all defence procurement.Imported Content => US$2 million

➢ Competitive Supplier Development Programme (CSDP): managed by DPE in conjunction with StateOwned Companies (SOCs).

➢ Designation & Local Production.

➢ The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

➢ The Local Procurement Accord.

Adjudication of Tenders with the Local Content Requirements

Bid invitations and conditions of contract• Specify local content requirements in the bid documents• Local content declaration certificate (SBD 6.2 / MBD 6.2) must form part of the bid

Bid evaluation and award• Two stage evaluation process

- first stage: Local content and functionality (if applicable)- Second stage: BBBEE and price

• Disqualification- If local content declaration is not submitted or threshold not met

Verification and Record Keeping- Random checks to be conducted- Records of supporting documents to be kept for 5 years

Procurement Levers in REIPPP

Price 70 points

• REIPPPP allowed to deviate from 90:10 system

• REIPPP allowed exemption from sections of the Broad-Based Black Economic Empowerment Act - codes of good practice

Minimum Local Content Thresholds for Designated Products

Designated ProductsLC

Threshold Date

16. Two Way Radio Terminals 60% 30-06-2016

17. Solar PV Components 15-65% 30-06-2016

18. Rail Signalling System 65% 30-06-2016

19. Wheelie Bins 100% 18-08-2016

20. Fire Fighting Vehicles 30% 21-11-2016

21. Steel Products and Components for Construction 100% 13-01-2017

22. Rail Perway (Track) Infrastructure 90% 13-11-2017

23. Pumps & Medium Voltage Motors 70% 12-12-2017

24. Plastic Pipes & Fittings 100% 16-08-2019

25. Air insulated MV Switchgear 50% 20-12-2019

26. Bulk Material Handling 85% 20-12-2019

27. Industrial Lead Acid Batteries 50% 20-12-2019

Challenges

• New economic opportunities are not seen as drivers for growth but perceived as threats.

• Matching of supply and demand in a sector that is based on bidding rounds with constantly changing rules.

• Who are the key decision makers and leaders in the sector and who are rent-seekers with a low appetite for socio-economic responsibilities.

• The bulk of the industrial opportunity in renewables seems to be in the construction phase.

• Incentives vs industry coordination and alignment. Government will not be able to subsidise new activities.•

• REIPPP has too many objectives without proper prioritisation – Suggestion - Follow two stage process -

Way Forward

• South African Renewable Energy Master Plan - The main purpose of a masterplan is to encourage optimalindustry growth – for the good of the industry concerned and broader society (private-public compact) – willfocus amongst others on the challenges - [email protected]

• Growing the Green Economy is now an official Key Performance Indicator for many Government departments –Should improve alignment

• Hydrogen Economy – Aviation fuel exports

mailto:[email protected]


Gerhard Fourie (Chief Director)

Green Economy

Department of Trade, Industry and Competition

[email protected]

Thank you

mailto:[email protected]

MALOBA TSHEHLAED Platform

Maloba, a proud Mosotho, is the Head of Strategy and Growth at ED Platform.He is responsible for managing inter-team collaborations to improve thebusiness' value offering and efficiency, as well as driving strategy to ensuresuccessful growth in current and new markets. Maloba is also charged withfostering innovation across the company's units, as well as ensuring optimalteam performance.

Maloba has experience in: green economy policy, renewable energy - bothutility scale and embedded generation, clean-technology innovation, andentrepreneurship. Prior to joining ED Platform, Maloba was responsible fordriving the technical aspects of incubation support for cleantechentrepreneurs at The Innovation Hub, additionally giving technical support toGauteng Provincial government clean energy initiatives.

Maloba is a Chemical engineer by training and also holds a Master’s degree inSustainable Development focused on RE. Maloba is keenly interested in whatsustainable development truly looks like on the African continent.

INDUSTRY PERSPECTIVES – SOLAR PV: REIPPPP REQUIREMENTS

Research and introspection• 2012 Solar PV localisation study; time for a new one• Empirical data on opportunity areas for economic impact (jobs + investment flows)• Focus on driving those areas• SAREM process begins the process of engaging all stakeholders and presenting a good plan to move forward

on, this needs to be continuous and iterative – as we implement

Strategic, consultative development and implementation of policy• Avoiding market unrest• Avoid programme complication and possible delays• Avoiding unintended consequences

How can we Drive Increased Localisation?

BW5

65%

40%

20%

20%

-

45%

30%

2.5%

25%

25%

25% - 30%

30%

5%

3%

0.6%

-

1.1%

-

Industry Perspectives – Solar PV: REIPPPP Requirements

What does industry need to make the move?• Consistency | Clarity | Signals | Consultation & Collaboration• There are examples of this

What are the existing mechanisms available?• IRP – rollout + update (market inputs, capacity constraints, economic opportunity…)• Designation – research led components selection; consultation on levels; progression of thresholds• ED requirements in procurement

Localisation beyond “local content”• Rest of value chain – what else, other than the panel and inverter, makes up the solar PV project? BOP

equipment and components, activities that happen beyond the proj. site,• Skills – skills transfer with OEMs, re-usable semi-low to high-end skills (design, Proj. Management, installation)• Services – Project dev., structuring, legal, design, financing, bidding, EPC, operations & management


New element!

Opportunity area 1


New element!

Opportunity area 2


Opportunity area 4

Opportunity area 3

New element!


Designated Local Content for Solar PV

systems

Implementing Designated Local Content

✓ The threshold level✓ Local capacity at present vs planned (and how to get there)✓ Local capacity to provide the quantity (alignment with IRP)✓ Local capacity aligned with global standards and technological developments (pros and cons)


Research and introspection• 2012 Solar PV localisation study; time for a new one• Empirical data on opportunity areas for economic impact (jobs + investment flows)• Focus on driving those areas• SAREM process begins the process of engaging all stakeholders and presenting a good plan to move forward

on, this needs to be continuous and iterative – as we implement

Strategic, consultative development and implementation of policy• Avoiding market unrest• Avoid programme complication and possible delays• Avoiding unintended consequences


INDUSTRY PERSPECTIVES - WIND

DANIEL ERASUN MORAGRI Towers SA

Daniel is GRI South Africa´s Plant Manager (Managing Director) since July2017.

Previously he spent 7 years in GRI Brazil, with several executive roles asManaging Director of the Services Business Unit (Logistics, Installation andMajor corrective Maintenance), as well as Supply-Chain Manager of theirBrazilian factories during that time.

He has been in the wind industry since 2008, always involved on the Supply-Chain and manufacturing businesses.

Daniel is also a member of SAWEA Manufacturers and Local Content WorkingGroup where he serves in a subcommittee which is tasked with the re-establishment of Wind Energy Localisation Forum.

Industry Perspectives - Wind

Index1. Wind Energy Global Value Chain

2. WTG Tier 2 suppliers

3. Market & Regulatory Challenges to be addressed

4. Industry requests

Information is marked as CONFIDENTIAL and belongs to GRI

Wind Energy Global Value Chain - Overview

Localisation main cost buckets and sub-items demonstrated

Wind Energy Global Value Chain - WTG Main Components

Wind Energy Global Value Chain – WTG Standard Industry approach

➢ Within the manufacturing of the main WTG (Wind Turbine Generator) components, the standard OEM industry practices varies between in-house manufacturing and outsourcing:

✓ Components that usually are manufactured directly by OEMs• Nacelles• Hubs

✓ Components that usually are manufactured independent by suppliers• Foundation/Anchor cages• Towers • Blades

Wind Energy Global Value Chain – WTG Localised main components

➢ Local Manufacturing is crucial to the success of the REIPPPP Economic Development component, as it is

the basis for creation of long-term sustainable employment opportunities.

➢ So far, since the launching of the REIPPP, the only main component that has been successfully localized is the Tower

✓ An Independent Steel tower facility was built in Coega (PE), but closed down and went into liquidation in 2020

✓ Another independent steel tower facility was built and is operating in Atlantis (WC)

✓ Concrete towers are being built on several sites for a specific OEM

✓ Anchor cages have been successfully localized

Wind Energy Global Value Chain – Local Manufacturing Opportunities

➢ Inputs received from the various parties on the SAWEA local content working group, in particular from OEMs, localand international manufacturers, show that industry is willing to undertake further commitments and ready to rollout further investments if the regulatory basics are in place.

➢ From this commitment, potential further investments could be materialized by means of✓ Expansion of current or new manufacturing capacity for towers (concrete and/or steel)✓ Independent Blade manufacturers✓ Potential Nacelle and Hubs assembly facilities

➢ Furthermore, there is a wide range of products that can be supplied by Tier 2 suppliers (sub-suppliers of maincomponent manufacturers), which open significant opportunities for Small and Medium Enterprises with sustainableManufacturing capabilities

WTG Main Components – Tier 2 suppliers

➢ Manufacturing of main components (Tier 1) use to attract government and OEM interest in terms of investmentsand job creation

➢ While a main component manufacturing facility have a major impact on its own, we need to put in context theknock-on effect and opportunities that triggers on the local industry

➢ Taking as an example the manufacturing of steel towers considering the R5 Volumes, below are some estimatedfigures of Tier 2 suppliers:✓ Around 80,000 – 100,000 Tm of steel plates ✓ Around 4,000 Tm of Steel for anchor cages✓ Around 6,500 Tm of rebars for foundations✓ Around 3,500 Tm of structural bolts✓ Around 640,000 litres of paint locally manufactured✓ Around 200 Tm of Industrial Gases locally manufactured✓ Around 500 Tm of internal aluminium platforms✓ Around 36,800 meters of electrical cables✓ Around 240,000 meters of Power cables


➢ There are a wide range of subcomponents (ladders and access ladders, galleries, guardrails, internal platforms, door and door

frames, structural bolts and transport kits) which can be easily localised


➢ Internal Platforms


➢ Access ladders


➢ Transport kits


➢ A further range of opportunities can be identified for other main components, as materials to be assembled on the

wind farm

Market and regulatory Challenges to be addressed

➢ Lack of continuity and predictability ✓ Industry needs long term uninterrupted market to facilitate new manufacturing investments✓ Auctions must be predictably scheduled on an annual basis to ensure the roll-out the 2019 IRP✓ Industry will not be sustainable if we continue on a Stop/Go mode

➢ Local content Procurement rules✓ Localisation targets must be clearly and timeously defined✓ Localisation objectives must be consistent through the Bid Windows and should not be overcomplicated

➢ Manufacturing of Main components is a very Specialised industry driven by economies of scale✓ Most of these facilities cannot be reconverted to manufacture alternative products if there is a market stoppage

Market and regulatory Challenges to be addressed

➢ Verification must be improved✓ Local content rules must be properly observed, audited and verified, in order to avoid opportunistic behaviours✓ Tariff heading codes used for imported wind components and subcomponents must be scrutinised

➢ Poor enforceability and lack of transparency on non-compliance penalties✓ The exemptions rules must be revisited and limited to cases of technically unavailable components✓ Financial penalties on under performance local content requirements must be revisited, becoming more severe

and being uniformly applied

Industry Requests

➢ Predictability, Policy Consistency and clear Regulatory Framework

✓ Primary consideration for investment in local manufacturing is the need for a sufficiently large market with

committed megawatt allocations per year to justify such investments

✓ Clear, reliable and long-term policy in localization is required to attract such investments

✓ Clear definition of the measurement of local content

Reliable & Stable Demand + Transparent Regulatory framework = Investments = Job Creation

➢ Flexibility

✓ Different OEMs might have different approaches or strategies on what and how to localize

➢ DTIC + IPP Office + DMRE needs to work together on building a fair, consistent and levelled playfield to facilitate

investment decisions

With a reliable environment in place, OEMs will be capable to build a Remarkable sustainable Industry

References

• SAWEA “Position Paper on RSA Manufacturing and local content requirements in the REIPPPP”

• SAWEA “Local content Threshold Proposal for Bid Window 5 letter” letter to IPP Office

• Mike Morris and Glenn Robbins “Is the aim of Localisation in RE to bring any peripheral social gains or to drive Green

Industrialization?”

• IPP Office, DTI and DST TLIU Concept Note “Local Content requirements Change recommendations on for IPPPP Bid

Window 5”

Local Content and the Verification Process

DESMOND GOVENDERGlobal Certification Solutions

Desmond Govender currently holds the position as Managing Director of GlobalCertification Solutions Pty Ltd which was established in March 2017. GlobalCertification Solutions is an organisation specialising in consulting on LocalContent, Management and product systems certification. Desmond possesses anEngineering Diploma and a Master’s Degree in Business Administration.

Desmond Govender heads the project where Global Certification Solutions wasappointed as the Economic Development Monitor by Gibela Consortium, who istasked to conduct Local Content and rail related skills development audits for(42) critical suppliers to Gibela who in turn suppliers train sets to PRASA.

Desmond Govender has previously held the position of General Manager of theLocal Content Verification Office at the South African Bureau of Standards whereis spent 15 years. He was the program Lead for the development andimplementation of a Local Content verification program to support theDepartment of Trade and Industry in Public Procurement. His role includedpresentations to Parliamentary Committees on the status of Local ContentVerification for designated products in RSA such as solar water heaters, rollingstock and buses. He also facilitated the process for providing key Local Contentinputs into the updated Mining Charter.


INTRODUCTION AND BACKGROUND

LEVERAGING PUBLIC PROCUREMENT FOR LOCAL INDUSTRY

▪ The Industrial Policy Action Plan (IPAP) objective took firm root when the amended Regulations to the PreferentialProcurement Policy Framework Act (PPPFA), Act 5 of 2000, were promulgated in June 2011 and became effectiveon Wednesday 7 December 2011

▪ At the helm of the IPAP implementation, the Minister of Trade and Industry acquired the power with theseregulations to designate specific sectors for local content

▪ The dti has set up the machinery to ensure implementation of the designations with the support of NationalTreasury which started the designation process

▪ SABS appointed the Verification Agency in 2012

▪ Verification of Local Content Commenced in 2013 with the First Local Content Certificate Issued within the BusBody Sector


HOW DOES THE VERIFICATION PROCESS START?

Definitions as per the REIPP Procurement Programme-BW5 RFP

"Local Content"

means the Economic Development Element which measures the utilisation of South African products in thedevelopment, completion, implementation, operations and maintenance of the Project as part of undertaking ProjectActivities. These products relate to the utilisation of raw materials, manufactured parts and components, utilities andservices;

"Local Production and Content"

means the value of expenditure in respect of items falling within a Designated Sector, Component or Product thatconstitutes local production and content, measured in accordance with the requirements of the National TreasuryDesignated Sectors Circulars;

"Local Content Spend"

means the portion of the Total Project Value that is in respect of South African Products;


HOW DOES THE VERIFICATION PROCESS START?

SECTORS of DESIGNATION as per the REIPP Procurement Programme-BW5 RFP

“Bidders should note that the calculation of Local Content Spend is comprised of a combination of Designated LocalContent, as prescribed in the National Treasury Designated Sectors Circulars, plus non-designated local production andcontent spend as contemplated in Regulation 8(4) of the Preferential Procurement Regulations”

As per Annexure 5 A there are 14 Designated Components sectors with specific thresholds.

Ones that stand out: (National Treasury Website under the Chief Procurement Officer)

Solar Photovoltaic System and Components Pumps, Medium Voltage motors

Bulk Material Handling Rail Permanent Way Sector

Steel Conveyance Pipes Large Bore Spiral Submerged Arc Welded Steel pipes

Industrial Lead Acid Batteries Values Products and Actuators

Electrical Cable Products Steel Power Pylons

Production of Plastic Pipes Transformers and Shunt reactors


Information forwarded to SABS via the

dtic

Local Content Verification Process –

Financial and Technical

Approval Board –

Verification Decision

Certificate creation

Data base entry and

maintenance


Information forwarded to SABS via the dticSATS 1286.2011

Annex C

Local Content Declaration - Summary Schedule

(C1) Tender No. GP 00111

(C2) Tender description:

(C3) Designated product(s)

(C4) Tender Authority:

(C5) Tendering Entity name:

(C6) Tender Exchange Rate: Pula EU GBP

(C7) Specified local content %

Calculation of local content Tender summary

Tender item

no's

Tender price

- each

(excl VAT)

Exempted

imported

value per

unit

Tender value

net of

exempted

imported

content

Imported

valueLocal value

Local

content %

(per item)

Tender

Qty

Total tender

value

Total exempted

imported content

Total Imported

content

(C10-C11) (C12-C13) C14/C15 (C10xC16) Annex D D18 Annex D(C8) (C10) (C11) (C12) (C13) (C14) (C15) (C16) (C17) (C18) (C19)

GP 00010 R 250 000 R 96 000 R 154 000 R 25 000 R 129 000 84% 400 R 100 000 000 R 38 400 000 R 10 000 000

GP 00011 R 400 000 R 180 000 R 220 000 R 31 000 R 189 000 86% 200 R 80 000 000 R 36 000 000 R 6 200 000

(C20) Total tender value R 180 000 000

Signature of tenderer from Annex B (C21) Total Exempt imported content R 74 400 000

(C22) Total Tender value net of exempt imported content (C20-C21) R 105 600 000

(C23) Total Imported content R 16 200 000

(C24) Total local content (C22-C23) R 89 400 000

Date: (C25) Average local content % of tender (C24/C22) 84.66%

60 Seater commuter bus

30 and 60 Seater commuter buses

Buses

Gauteng Purchasing Department

Unibody Bus Builders (Pty) Ltd

Note: VAT to be excluded from all

calculations

List of items

(C9)30 Seater commuter bus


Information forwarded to SABS via the dtic

Annexure D


Information forwarded to SABS via the dtic

Annexure EEXAMPLE SATS 1286.2011

(E1) Tender No. GP 00111

(E2) Tender description: 30 and 60 seater commuter bus

(E3) Designated products: Buses

(E4) Tender Authority: Gauteng Purchasing Department

(E5) Tendering Entity name: Unibody Bus Builders (Pty) Ltd

Local Products

(Goods, Services

and Works)

Local suppliers Value % of LC

(E7) (E8)

Arcelor R 34,000,000

Galvenor Textiles R 7,750,000

Galvenor Textiles R 1,250,000

ABR Supplies R 250,000

Dunlop R 1,000,000

Various local suppliers R 500,000

Laser cutting services Red Hot Cutting R 245,000

Other goods & services (small items) Various R 5,000

(E9) Total local products (Goods, Services and Works) R 45,000,000 50%

(E10) Manpower costs ( Tenderer's manpower cost) R 20,000,000 22%

(E11) Factory overheads (Rental, depreciation & amortisation, utility costs, consumables etc.) R 15,000,000 17%

(E12) Administration overheads and mark-up (Marketing, insurance, financing, interest etc.) R 9,400,000 11%

(E13) Total local content R 89,400,000 100%

Signature of tenderer from Annex B

Date:

Annex E

Local Content Declaration - Supporting Schedule to Annex C

(E6)

Note: VAT to be excluded from all

calculations

Tyres and wheels

This total must correspond with Annex C -

C24

Description of items purchased

Sheet Steel

Fabric for seats

Fabric for headlinings

Welding consumables

Hardware items (nuts, bolts, rivets etc.)


Local Content Verification Process – Financial and Technical

Financial Auditors will analyse financial transactional documentation such as purchase orders issued by procurer andinvoices received from First-Tier Suppliers to validate and verify the materials depicted on the Bill of Material(Annexures) are correct.

In order to determine the local and/or imported content values of the actual invoice price as per the First-Tier Supplier,the auditors may need to also analyse and verify the invoices received by the First-Tier Supplier’s key sub-contractorsthat are directly contracted and subsequent tiers that make up the First Tiers Supplier’s supply chain.

Technical Auditors will use the data/sample gathered from the Financial Audit process to determine capability and incertain instances capacity to produce materials at the manufacturing facility by verification of incoming material’scertificate of compliance or certificate of analysis, verification of packaging, job cards, production orders/plan andwitnessing of the manufacturing processes were appropriate.

The audit will include at a minimum three tiers of the Supplier’s supply chain, starting at the First-Tier Supplier’s finalassembly level and sub-assembly level depending on the complexity of the component/system being produced.


Local Content Verification Process – Calculations


Approval Board – Verification Decision

Auditors will prepare audit reports with the details of the samples taken and the conclusion of compliance/non-compliance with respect to the obligations for Local Content as defined firstly by the First-Tier supplier’s claim andsecondly by their contractual obligations as seen in annexure C submitted by the dtic.

Information of the audit is submitted to an independent board and if the supplier meets the minimum threshold apositive certification decision is made to issue a Local Content Certificate having an expiry date based on the contract.


Lessons Learnt

• Confidentiality with regards to 2nd & 3rd tier suppliers needs to formalized by the First-Tier Supplier during theircontracting phase.

• The shortcomings on the understanding of the Bill of Materials and the different levels of the BOM by Suppliers andthe Verification Agency was evident in the earlier verifications. Articulating this BOM into the Annexures C, D and Erequired numerous interventions.

• Self declarations made in the Annexures C, D and E by 2nd and 3rd tier suppliers was not always a true reflection ofmanufacturing as defined by SANS 1286.

• Exemptions are assumed by suppliers during the contract deployment phase and not requested prior to the tenderbeing awarded.


Practical Example from the Lessons Learnt for the preparation of the Verification Audit

• Completion of Annexure C, D and E is automated by a web- based solution which tracks the local contentpercentage per component that forms part of the bill of material at minimum three levels.

• Technical and financial auditors are deployed to the suppliers assisting to gather data and support the web-basedsolution.

• Confidentiality within the supplier chain remains protected as the Web-based solution only allows the Local Contentpercentage to be reported to the customer of the supplier and not the suppliers full BOM via access protocols.

• Web-Based solution allows for Local Content percentages to be tracked in real time allowing reporting of the rampup of local content during course of the whole build program.

SPOTLIGHT

Lehlogonolo MohlalaENERTRAG

Legal Counsel

SPOTLIGHT

TRANSFORMING RENEWABLE ENERGY IN SOUTH AFRICA

MAY 2020

OUR BACKGROUND

o Established in South Africa in 2017

o Wholly owned by ENERTRAG AG Germany a privately owned company

o Offices in Cape Town, Johannesburg and Pretoria

o Our Business Model is to - keep it local!

o Current staff compliment all African - 99% South African

o Female Employees – 50%

WHAT WE DO

SPOTLIGHT

CONTRIBUTION TO RE LOCAL VALUE CHAIN

Met Masts in Mpumalanga (the heart of the energy transition) andother low yield areas to spread localisation and promote:

• RE industries in coal regions

• restructuring existing industries to be RE inclusive

• reskilling of labour

• the just transition

LOCAL JOB CREATION, TALENT RETENTION & UPSKILLING

o We have skills available locally

o Requires commitment from Senior and Line Management

o Internship Programmes and Succession Planning is key

o Mentorship and guidance within the company is crucial

o Active participation – both management and employees

HOW DO WE ACHIEVE THIS

LOCAL COMPANY APPOINTMENTS IN THE VALUE CHAIN

RECRUITMENT WITH

MEANING

CAREER DEVELOPME

NT PROGRAMME

S

FOR SOUTH AFRICANS/

LOCALS

SPOTLIGHT

We would love you to be a part of our proudly South African Team!

VISIT:

https://www.enertrag.co.za/careers/

https://www.enertrag.co.za/careers/

Q & A

QUESTIONS AND ANSWERS SESSION

Please type your questions in the message box and we will respond.

Niveshen GovenderSAPVIAChief Operating Officer

Closing remarks

CLOSING REMARKS

Thank you for joining our first webinar of the ‘Developing the Local RE ValueChain’ series

Niveshen GovenderSAPVIAChief Operating Officer

Upcoming Webinars

DATE WEBINAR TOPIC

20 May 2021 Understanding the Local Content Requirements in the REIPPPP

10 June 2021 Opportunities in Project Development Phase

15 July 2021 Localisation Opportunities in Manufacturing Value Chain

19 August 2021 Opportunities in transportation & Logistics

16 September 2021 Localisation Opportunities in the Construction Phase

21 October 2021 Localisation Opportunities in the Operation & Maintenance Phase

localisation opportunities in manufacturing value chain

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