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THEEWATERSKLOOF GREEN ECONOMY

A renewable energy and green business opportunities scoping

study

anton@econologic.co.za 1

1 Anton Cartwright is an independent economist and a researcher with the African Centre for Cities. Jacqui Boule

and Joanna Dibden of Theewaterskloof provided invaluable support to this scoping study and comments on early

drafts. Lisa Constable from ERM (Pty) Ltd provided valuable comments on an earlier draft of this strategy.

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CONTENTS

1. INTRODUCTION 3

2. THE NATURE OF THE THEEWATERSKLOOF ECONOMY 6

3. THEEWATERSKLOOF GREEN ECONOMY OPTIONS 10

3.1 Carbon 10

3.2 Water 16

3.3 Built environment and the space economy 20

3.4 Industry and energy security 25

3.5 Innovative farming and biodiversity 30

3.6 Innovation and the knowledge economy 34

4. WHAT ROLE FOR THE MUNICIPALITY? 37

5. BUSINESS OPPORTUNITIES, AND EMPLOYMENT POTENTIAL 45

6. CONCLUSION 46

REFERENCE LIST 48

APPENDIX A: PRINCIPLES OF THE GREEN ECONOMY 52

APPENDIX B: INNOVATORS AND PIONEERS IN THEEWATERSKLOOF GREEN ECONOMY 58

APPENDIX C: CARBON TAX 65

APPENDIX D: LIST OF CONSULTED PEOPLE AND COMPANIES AND PRESENTATIONS 65

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1. INTRODUCTION Theewaterskloof Municipality is busy with the remarkable process of formulating a “2030

Strategy”. The strategy aims to guide development planning over the next 19 years, and has

identified making Theewaterskloof (1) a great place to live, (2) a visitor destination of choice, (3)

a centre of learning, (4) a vibrant economy and (5) a green and low carbon economy, as among

its ambitions. The exercise is remarkable in that local governments in South Africa, loaded with

a raft of novel and at times unfunded socio-economic development responsibilities when

municipal boundaries were redrafted in 2000 (RSA, 1996; dplg, 2002), have generally struggled

to perform their day-to-day tasks let alone plan for their future or strategise around their

development responsibilities. In the course of developing its 2030 Strategy Theewaterskloof has

identified “sustainability” as being central to the pursuit of all other goals (TWK, 2010b) and the

municipality is looking to attract investment and create employment through a “green

economy”. In so doing Theewaterskloof is aligning itself with a global trend.

The “green economy” re-entered the global economic discourse in the wake of the 2007 financial

crisis when 6 per cent (US$188 billion) of the fiscal support package was reserved for “green

stimuli” (Bloomberg, 2009). Understanding of what is meant by the “green economy” has

remained fluid. UNEP initially proposed a sector-based understanding2, but has subsequently

developed a more encompassing definition: “A green economy is one that results in improved

human well-being and social equity, while significantly reducing environmental risks and

ecological scarcities. In its simplest expression, a green economy can be thought of as one which

is low carbon, resource efficient and socially inclusive” (UNEP, 2010).3 In a signal of intent, the

United Nations indicated that the Earth Summit in 2012 (called Rio+20 to mark the 20th

anniversary of the founding summit at which the United Nation‟s Agenda 21 was adopted) will

be exclusively focussed on the green economy and in February 2011 UNEP released its most

recent and most detailed articulation of the green economy, Towards a Green Economy: Pathways

to Sustainable Development and Poverty Eradication (UNEP, 2011) which expounds seven key

statements:

A green economy recognises the value of and invests in natural capital (especially

“living capital”)

The green economy is necessary for poverty alleviation

The green economy creates jobs and promotes social equity

2 Agricultural, manufacturing, research and development (R&D), administrative, and service activities that

contribute substantially to preserving or restoring environmental quality.

3 http://www.unep.org/greeneconomy/AboutGEI/FrequentlyAskedQuestions/tabid/29678/Default.aspx

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In the green economy, renewable energy and low carbon technologies substitute fossil

fuels.

A green economy makes better use of resources

The green economy involves more sustainable urban living and low carbon mobility

A green economy grows faster than a brown economy (over time) while maintaining the

value of natural capital.

Behind these statements is the assertion that, “The green economy is not only the best economy

of the future, but the only economy” on the grounds that developing economies no longer have

the option of pursuing the extractive and resource intensive industrial development pathways

used by current-day OECD countries in the 20th Century (see Figure 1).

Figure 1: Over the past 30 years growth in global GDP has outpaced population growth and a $ of global GDP has become less material intensive. Resource extraction, however, has grown at a similar pace as global GDP and contributed to growing pollution, environmental degradation and growing resource constraints (UNEP, 2011)

South Africa has picked up on the emerging green economy discourse, most notably in recent

State of the Nation addresses (Presidency, February 2010 & February 2011) and via the newly

formed Ministry of Economic Development.4 For South Africa the green economy offers the

hope of redressing the capital-labour ratios and spatial forms that constrain the prevailing

4 At the opening of the Green Economy Summit in Sandton 2010, Minister Ibrahim Patel said, “Government is

working on a new growth path that seeks to be more labour absorbing, less carbon intensive and that connects the

significant scientific and technological capacities of the society with the challenges of jobs and economic growth,”

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economy. South Africa certainly has the legislative instruments to participate in such an

economy. Post 1994, South Africa‟s policy makers drew eclectically on international best

practice to craft the National Water Act (NWA) (1998), the National Environmental

Management Act (2008), the White Paper on Energy (1998) and hastily signed United Nation‟s

conventions to fight desertification (UNCCD), biodiversity loss (UNCBD), atmospheric

pollution (Montreal Protocol), wetland destruction (Ramsar Convention) and climate change

(UNFCCC). Implicit in much of this legislation was the understanding that a functional

environment was necessary for economic growth and poverty alleviation and that a reform of

environmental rights was a component of the reform of human and economic rights. Good

policies on their own, however, do not ensure change. At a national level the difficult structural

decisions that would have ensured a departure from the business as usual and particularly the

“mineral-energy complex” (Fine, 1999) have never been confronted in South Africa. Instead of a

green economy, South Africa has pursued a series of projects and programmes with distinct

economic, social and environmental objectives. The result has been a collection of economic

contradictions:

The National Water Act (1998) is internationally acclaimed but is undermined by a series

of perverse incentives for the water misallocation, not the least of which is price

protection for the sugar industry that absorbs disproportionate volumes of water

relative to the income and employment that it creates.

Employment hope is placed in eco-tourism, but pristine habitats are repeatedly

compromised by the extension of mining rights.

The President has proposed strident cuts in greenhouse gas emissions and Cabinet has

approved a “carbon tax”, but State Owned Companies continue to be amongst the most

greenhouse gas intensive in the world and are expanded in the interests of

developmental government.

The natural environment provides valuable services, especially to the most poor, but

many of these services are compromised by the manner in which infrastructure and

houses are built.

A carbon tax has been levied on all new vehicles, but the statutory guidelines on diesel

and petrol quality are outdated and do not permit the type of fuel quality that would

allow fuel-efficient vehicles to be introduced onto South Africa‟s roads.

The “minerals energy complex” that defines so much of South Africa‟s economic

structure, has remained in-tact, in spite of its negative implications for the environment,

employment creation, energy security and economic diversification.

A certain level of contradiction is perhaps inevitable. Resources are limited, the legacy of past

decisions endures, needs are varied and trade-offs are an unavoidable part of development. But

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the extent of the contradiction in the national economy is testament to the danger of pursuing

projects without principles. In South Africa‟s national discourse the green economy is seen as an

add-on, an annex to the real economy with the potential to create a few additional jobs5 and

revenue streams if it succeeds. In this way the green economy is seen much like Local Economic

Development (LED) as something distinct from the mainstream economy. If the green economy

is to fulfil its potential for job creation, investment attraction and the enhancement of economic

competiveness in Theewaterskloof then the green economy needs to be seen not as a distinct

sector, but as a way of taking economic decisions that acknowledges the principle that all

economic activity is dependent on natural resources, the flow of economic services and

environmental stability.

The green economy theory and principles that inform this scoping of programmes and projects

in Theewaterskoof align closely with UNEP‟s latest position (UNEP, 2011) and are presented in

more detail in Appendix A of this report.

2. THE NATURE OF THE THEEWATERSKLOOF ECONOMY Theewaterskloof is a diverse municipality: humid in the west, arid in the east; accommodating

both intensive-irrigated and extensive-dryland agriculture; it is a centre of excellence for the

country‟s fruit industry and home to a number of leading enterprises while also containing a

growing level of informal business and housing. Urbanisation into rural towns has increased,

but much of the municipality remains rural, agricultural and sparsely populated.

It is ironic for a rural, hinterland municipality such as Theewaterskloof that its sustainability

success is likely to be determined by its towns. The agricultural sector will continue to provide

the mainstay of the Theewaterskloof economy until 2030, but the key changes and arising

challenges will be result of migration to the municipality‟s towns from farms, from Cape

Town‟s peri-urban settlements and from elsewhere in the sub-Continent. The ability to

accommodate and service up to 240,000 people (a more-than-doubling of the 2010 population)

by 2030 in a manner that supports local markets, facilitates the extension of services so as to

improve living standards and does not destroy the environmental resource base that supports

all economic activity in Theewaterskloof, will ultimately determine how sustainable

Theewaterskloof is in 2030. The municipality‟s towns are faced with the challenge of extending

accommodation and services, maintaining existing infrastructure and simultaneously re-

inventing themselves as economic hubs and places to live, rather than agricultural service

depots. 55

South Africa’s governing party believes the green economy can create 300,000 new employment opportunities

by 2020. The green economy in National Government’s analysis is depicted as a sector, and the anticipated

employment creation is greater than any other single sector.

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Figure 2a: TWK Gross Value Added (2000-2008) Figure 2b:Sectoral contributions to TWK economy 2008

Economic growth in Theewaterskloof has been above the national average over the past decade.

The economy relies heavily on the agricultural sector which, although growing, is unable to

generate sufficient employment to address the unskilled labour surplus. The rate of economic

diversification into construction, agri-processing and manufacturing accelerated between 2000

and 2008, but even if this trend is extrapolated these sectors are unlikely to meet the extent of

the demand for employment, services, housing and infrastructure. What the trends do reveal is

that supplying sufficient water, housing, refuse removal and employment, while still

supporting local markets, will require a structural break from “business as usual” in terms of

service delivery (TWK, 2010). Outlining how to achieve this without destroying the existing

economy or the natural resources that provide the bedrock of the municipality‟s economy is

central to Theewaterskloof‟s 2030 Strategy.

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Figure 3: Aerial photograph showing most of Theewaterskloof Municipality, the major towns and roads. The water catchment in the west and the drier grainlands of the east.

That the Theewaterskloof economy is undergoing rapid flux is undeniable. The rate of change

requires difficult decisions, especially if it is acknowledged that a simple replication of past

development is neither possible nor capable of delivering on the socio-economic need. The

proposed Caledon Casino and golf estate development, for example, will bring an estimated R6

million worth of rates to the Municipality every year and enhance the purchasing power in the

region, but the associated housing estate and petrol station is in many ways inconsistent with

the notion of densifying and investing in the centre of Theewaterskloof‟s towns so as to create

mixed-use public spaces, while the private sector investment in water infrastructure that forms

part of the development will complicate water governance for the Catchment Management

Agency.

To its great advantage, the municipality is home to a large number of established and

innovative agri-processing businesses and business leaders and is the target location for

aspirant renewable energy and energy technology companies. It is also pioneering a number of

sustainable development initiatives and programmes through the Municipality, the

Development Bank of South Africa, the Worldwide Fund for Nature and local NGOs.

Understanding the operations, needs and strategies of local companies and their people is

essential in understanding and supporting the emergence of a green economy in

Theewaterskloof. Based on interviews conducted as part of this study, Appendix B contains a

description of some of the pioneering and innovative companies and programmes that are

underway or being considered within Theewaterskloof. From Annex B it is clear that:

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i. The extent of existing capacity (management, innovation and industrial) and activity in

Theewaterskloof is remarkable. This provides the foundation for future green economy

activity and permits a level of ambition that is not justified in many other municipalities.

It is important that the ideas proposed in this study succeed or fail on their intrinsic

merit, and not simply due to poor implementation. In the words of the Municipal

Manager6, “Theewaterskloof seeks to be a reliable guinea-pig”. Certainly

Theewaterskloof has the capacity to pilot programmes and innovations that could find

application elsewhere.

ii. Existing practise in Theewaterskloof contains both good and problematic precedents,

both of which are able to inform future decisions so as to allow for the consistent

management of existing and imminent trade-offs.

iii. There is potential for symbiotic relationships between Theewaterskloof‟s innovators, so

as to enhance the flow of materials, energy and benefits throughout the local economy.

For example (based on Appendix B) WWF‟s existing “water neutral” programme could

include the Palmiet River; combustible solid waste from the Municipality‟s landfills

could be transported to energy co-generators instead of Overstrand; energy intensive

industries could purchase “green” wind energy from the wind farm in wheeling

agreements; the Caledon Casino and large farming enterprises could benefit from the

broad-based BEE participation of the Community Trust; the Elgin Learning Foundation

and the GSDI could partner with Electricall in establishing mini-grids; eco-estates could

procure renewable energy from the proposed “green” business park; local industry

could collaborate to address the common problem of increasingly expensive road

freight; Appletiser and the Melsetter Group could share ideas on re-using “waste”

water; the findings of Colors biochar experiment could be used to benefit the entire

industry; in general there are a multitude of learning opportunities if the

Theewaterskloof innovators were to share ideas in the interests of a local knowledge

economy.

That Theewaterskloof has a number of Municipal, civil society, business leaders and companies

that are already active in their pursuit of the green economy, does not negate the need for

principles and guidelines that reduce uncertainty and manage expectations. Some of the

existing policy uncertainty is a function of national policies and it would be wrong to assume

that a local municipality such as Theewaterskloof could, on its own, create the definitive

enabling environment for a green economy; but it can be expected to play its part. A green

economy strategy, in conjunction with the 2030 Strategy, provides the framework required to

manage social, ecological and economic trade-offs in a consistent manner.

6 Mr Stanley Wallace, addressing the Stellenbosch University Council 31 March 2011.

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Central to the approach adopted in this document is the understanding that investments in

ecological capital have multiple positive spin-offs for the economy and for people. This notion is

supported by a form of Endogenous Growth Theory (Romer, 1986; Romer and Rivera-Batiz,

1990) in which investments in ecological capital create self-perpetuating spirals of growth

driven by improved human capital, greater resource efficiency and fewer market failures and

associated poverty traps. An Endogenous Growth model involving ecological capital depends

on the effective management (or governance) of the “commons” (the atmosphere, biodiversity,

water resources, soil fertility) so as to prevent productivity collapse and ensure more efficient

and equitable access to resources (Ostrom, 1990 & 1994; Williamson, 2000). Ostrom cautions

against a reliance on global institutions to solve the problem of coordinating and marshalling

work against environmental destruction, and points out that key management decisions should

be made at the local level and based on local conditions. This formed part of an idea that saw

Ostrom win the Nobel Prize for Economics, and one that fits neatly with the idea of a

Theewaterskloof green economy.

Identifying and selecting the type of investment opportunities that will lead to better

governance of the “commons” and support endogenous growth is the focus of this scoping

study. It is useful to assess opportunities within central themes. The ideas discussed below are

presented under the headings (i) carbon, (ii) water, (iii) the built environment and space

economy, (iv) industrialisation and energy security, (v) biodiversity and sustainable agriculture

and (vi) the knowledge economy.

3. THEEWATERSKLOOF GREEN ECONOMY OPTIONS

3.1 CARBON

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Measure Greenhouse gas inventory Identification of key greenhouse gas sources and planned reduction

Tourism Carbon Voluntary off-set market functioning in TWK

TWK tourism reduces its carbon footprint and revenue invested in RE &EE projects

Soil Carbon Soil carbon:nitrogen restored to pre-degradation levels

Less GHG emissions and greater soil fertility and water absorption.

SWH and energy efficient technologies

Installation of SWH on every house in TWK. Energy efficient lighting

Demand side management as the cheapest source of “energy creation”. Carbon liabilities reduced.

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and insulation as standard in all houses.

Gloally, the burning of fossil fuel currently emits 9 billion tons of carbon dioxide equivalent

(CO2e) greenhouse gas per annum and atmospheric concentrations of CO2 have increased from

280ppm in 1850 to 390 ppm. As a result, mean atmospheric temperatures have increased 0.74°C

over the past century and an increase of 2.2°C by the end of this century is now unavoidable

(Parry, 2009)7. The real danger is that the 9 billion tons emitted annually catalyses much greater

emissions as warming climates release greenhouse gases from vaults in the permafrost, tundra

and oceans - a scenario referred to as “run-away climate change”.

Figure 4: Temperature increases by continent. Source IPCC Fourth Assessment Report, 2007.

South Africa‟s is a greenhouse gas intensive economy. Each megawatt hour (MWh) of electricity

produced in South Africa results in just over one ton of CO2 equivalent being released into the

atmosphere, and for every $1,000 of GDP produced in South Africa almost 1.4 tons of CO2

equivalent greenhouse gas is released (Cloete, 2010). Theewaterskloof is no different. Half the

7 Martin Parry heads the IPCC’s Working Group 2 and was addressing a group at SwissRe’s Centre for Global

Dialogue in Switzerland, July 2009.

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electricity consumed in Theewaterskloof is purchased by the Municipality from Eskom for

forward sales to urban consumers. The balance is purchased by industry and rural consumers

directly from Eskom. In both cases the low grade of coal used as a feedstock, transmission losses

as the electricity is transported from the East Rand to Theewaterskloof and energy intensive

applications and activities in Theewaterskloof combine with land use practices to release an

estimated 877,000 tCO2 in the municipality annually (based on 2010). Unchecked this could

increase three-fold by 2030 as population and the economy grow (TWK, 2010). There is

mounting international pressure, however, to curtail emissions and although South Africa (as

an “Annex 2” developing country signatory to the Kyoto Protocol) does not currently face a

legally binding emissions reduction target, the Presidency has provisionally committed the

country to a 34 per cent reduction in emissions relative to “business as usual” by 2020 and 42

per cent by 2025. Many municipalities and cities, seeking a presence in international markets,

are forging their own climate change mitigation strategies (see Amman, Vancouver, Curitiba,

Cape Town, Durban, New York, London).

Figure 5: Carbon intensity of economies with GDP greater than US$ 200 billion (2008). Source: Cloete (2010)

In late 2010 National Treasury published a discussion paper exploring options for

implementing a carbon tax in South Africa (National Treasury, 2010). The proposed carbon

taxes were approved by Cabinet in December 2010. Treasury considers a carbon tax of R75 per

ton of carbon dioxide (tCO2), increasing to R200/tCO2 over time to be “feasible and

appropriate” to induce behavioural changes and achieve reduction targets. A domestically

raised carbon tax would avoid the alternative of this levy accruing to South Africa‟s export

markets in the form of “border adjustment taxes” levied by countries seeking to manage their

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own emissions. As a phenomenally carbon intensive economy (see Figure 3), South Africa‟s

commitment to the global need to reduce emissions will have a disproportionately negative

impact on the country‟s economy, relative to many of our competitors. The production and

export of a kilogram of fruit from Theewaterskloof, for example, results in 2.0 kilograms of CO2

being emitted on average.8 A carbon tax of R100 per ton of CO2 would add R 0.20 to the cost of

each kilogram of export fruit. Significantly the same tax levied on Chilean fruit would add only

R0.06 – R0.11 per kilogram of fruit.

A carbon-constrained world will affect the competitiveness of all Theewaterskloof sectors. The

solution lies in better managing the municipality‟s greenhouse gas emissions, and using this

process as a means of introducing a suite of production efficiencies so as to gain an economic

advantage over other South African municipalities and competitor regions outside of South

Africa. The planned installation of utility-scale wind turbines is unlikely to reduce the carbon

intensity of the municipal economy, given that the carbon credits from these projects have

already been sold. There are, however, a number of potential actions listed below that

Theewaterskloof could readily pursue in preparing its economy for carbon constraints.

Measure:

The chief greenhouse gas, CO2, is for the most part, colourless and odourless and

invisible. Yet the Stern Review (2007) estimated that each ton of CO2-equivalent costs

society ZAR 770.9 This is a cost worth managing, but management is only possible if a

clear indication of the volume and source of emissions is available. As a signatory to the

UNFCCC South Africa is required to submit a national greenhouse inventory, but this is

a compliance measure not a management tool and it provides little information at the

local scale. A regularly updated Theewaterskloof greenhouse gas inventory would

enable local awareness and management of emissions. A local inventory, compiled to

international standards, would give Theewaterskloof credibility in its efforts to reduce

its emissions and allow the municipality to promote its carbon management efforts with

credibility on the national and international stage.

Tourism Carbon:

The global carbon market attempts to channel investment in renewable energy and

energy efficiency to regions and technologies with the lowest “marginal abatement cost”

8 Citrus: 1,22 kg CO2e/kg, Topfruit: 1,70 kg CO2e/kg, Stonefruit: 2,58 kg CO2e/kg, Grapes: 2,33 kg CO2e/kg, Easy

Peelers: 1,33 kg CO2e/kg fruit, Oranges: 1,17 kg CO2e/kg

9 TruCost, the UK NGO put the “marginal social damage cost” at US$ 31 per ton.

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– those which achieve the greatest reduction in emissions for the least money. The

market, which operates through the Clean Development Mechanism and various

voluntary market standards, has become hampered by high transaction costs and an

inability to accommodate small developmental projects, most notably in Africa. It is,

however, possible for regions and sectors within regions to operate their own carbon

markets. A precedent for this has been established by the “Kruger2Canyons Community

Carbon Trading Project” in the South African Lowveld, and a similar programme is

proposed for Theewaterskloof‟s tourism sector.

The Lowveld project operates on a voluntary basis. Tourists are given the option of off-

setting the emissions associated with a typical bednight and during game drives. The

required payment amounts to just under R15 per person per bednight (based on typical

consumption of Eskom energy during a bednight) and the revenue gathered is used to

support local development projects to introduce renewable energy and energy efficient

technologies and forestry and agricultural projects that sequestrate carbon. All

transactions are recorded in a central registry and off-setters are issued which credit

certificates when they check out of their accommodation.

Such a programme would allow Theewaterskloof to market itself as a “low carbon”

tourism destination, but also position it for a time when mandatory restrictions are

required of the municipality or the tourism industry. In addition money would be

generated for use in renewable energy and energy efficient projects. Where effectively

managed, this money can be used to supplement the Municipality‟s indigent energy

budget and create community development projects that tourists themselves may visit.

Soil Carbon:

Theewaterskloof‟s commercially successful agricultural sector has, in conjunction with

the local forestry sector, depleted much of the municipality‟s soil carbon reserves over

many years. Soil carbon represents a sink for atmospheric carbon. When depleted, soil

carbon contributes to global warming – globally roughly 25 per cent of the increase in

atmospheric CO2 since the industrial revolution is the result of land use changes and the

associated depletion of soil carbon (IPCC, 1998). Soil carbon is further important in

controlling the impact of erosion and enhancing water infiltration. We know that in

semi-arid climates, rainfall events exceeding 10 mm tend to result in run-off, some

erosion and soil carbon losses (Boardman et al., 2010). The extent of erosion increases

dramatically as rainfall increases and where soil has been predisposed to erosion by

overgrazing, compaction or organic material depletion.

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A Theewaterskloof programme that committed farmers to periodically restoring and

maintaining pre-degradation soil carbon:nitrogen ratios would sequestrate greenhouse

gases, improve water infiltration and nutrient cycling and reduce erosion thereby

contributing to a more sustainable agricultural sector. It would also secure considerable

acclaim for the municipal agricultural sector. The Melsetter Group is, in conjunction

with Stellenbosch University, already undertaking such a programme. Soil carbon is

relatively easy to measure and soil carbon levels can be restored through judicious crop

rotation and the addition of either biochar, nitrogen fertilisers, treated municipal sludge

or the ploughing-in of alley crops and weeds. The proposed concept would be similar to

maintaining what the water sector refers to as the “ecological reserve” – a critical

minimum amount of water in each catchment so as to maintain hydrological functions.

A soil carbon reserve would maintain the long term fertility of the region‟s land.

The recording and managing of soil organic carbon within the municipality is

compatible with the ongoing effort to identify the region‟s “terroir” locations for the

production of quality wines (see below) and the compatibility is itself symptomatic of

the type of value-addition that the green economy frequently yields.

In discussion the University of Stellenbosch‟s has committed its Department of Soil

Sciences to conduct an experiment involving the use of biochar, alley cropping and

inorganic nitrogen fertilisers to gauge the relative merits of each approach to improving

soil carbon:nitrogen ratios.

Solar water heaters and energy efficiency technologies:

Solarwater heater (SWH) roll-outs are already a component of the national energy

strategy. The national programme offers (at best) a 90 per cent rebate on the cost of

installation (Worthman, pers comms)10 and the most successful programmes are those

supported by their local municipalities in order to cover the balance of funding and

maintenance. The cost of SWHs is coming down, the quality is improving, the cost of

Eskom electricity is increasing. The trends combine to give a current pay-back on a

solarwater heater installation to private houses of between 2 and 4 years. The payback is

quicker if the Eskom rebate is accessed. A 150 litre SWH heater saves roughly 2 tons of

CO2 per annum per household of four people. Trading this carbon could contribute

roughly R160 per annum per unit to the revenue streams available for installation and

maintenance, provided suitable voluntary carbon market outlets can be secured.

Regardless of carbon revenue, a SWH saves domestic users up to 25 per cent of their

monthly electricity bill.

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Cedric Worthman is in charge of the low cost solarwater heater roll-out at Eskom

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The same increasingly favourable cost-benefit trends apply to a suite of demand-side

management technologies such as Low Emission Diode (LED) building and public

lighting, geyser insulation sleeves, ceilings in houses and solar passive design of

buildings. These technologies are set to become a feature of all South African

municipalities regardless of how the national grid sources its energy. Supporting the

establishment of industrial capacity to either manufacture or install these technologies

within Theewaterskloof will ensure Theewaterskloof businesses a stake in a local growth

sector.

The Municipality is not responsible for housing budgets but does have a say in where

and how these projects are developed. By enforcing the use of energy efficient and

renewable energy technologies on houses at both ends of the market, the Municipality

would not only reduce the local greenhouse gas emissions, but support better quality,

more sustainable, residential development. Demand side management technologies do

reduce the amount of money that the Municipality can make by forward selling bulk

electricity from Eskom to private users. This budget short-fall would have to be

managed and should prove negligible relative to the rates and levies secured by the

Municipality once Theewaterskloof is recognised as a prosperous, sustainable and well-

managed municipality.

Crucially, demand side management technologies can be financed by banks or

mezzanine finance instruments, where the savings on Eskom electricity are used to pay-

back the costs incurred in the installation of the technologies. IDC, commercial banks,

UNEP Finance Initiative, DBSA and even some installers such as Teljoy have explored

this model with success.

3.2 WATER

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Water governance CMA functional and NWA rolled out

Water governance is closely linked to returns on water and avoiding crises. The NWA is an acclaimed piece of legislation that requires local implementation.

Water differentiation

Different qualities of water applied for different uses

Not all uses requires the same quality. Differentiating can save money and see better utilisation of resource.

Plug leaks More efficient municipal water use

Existing leaks are extensive and the cost benefit of plugging leaks is favourable.

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Promote efficient irrigation technology

Less water used for higher yields, less soil erosion. Gap between best and worst irrigation practice narrowed.

Agriculture is the greatest consumer of water. Current wide range in gap between best and worst irrigation practice can be easily closed.

Prevent Municipal and agricultural contamination

Less sewerage and agricultural discharge. Better water quality in natural resources.

Water quality reduces the available resource.

Expand links with WWF‟s Water neutral programme

Rehabilitation of the Palmiet River and investment in hydrological infrastructure

Expanding existing links with WWF‟s water neutral programmes attracts investment, creates employment and rehabilitates existing water resources, freeing up water.

South Africa is a water scarce country.11 Theewaterskloof is fortunate to be part of the Breede

Overberg Catchment, a basin that was reported to have a small water surplus in DWAF‟s

internal strategic perspective study (DWAF, 2000). This surplus is under extreme pressure as

demand in Cape Town and locally grows, and much of Theewaterskloof is socio-economically

constrained by water shortages. The origins and economic implications of this scarcity are not

always understood. South Africa captures 79 per cent of its available water resource in large

dams – the highest proportion of capture in the world (Turton, 2010) – a status that precludes

the construction of new bulk water storage infrastructure. Accordingly, the national policy

focus has shifted to making better use of existing water. Technology has a role to play. Grey

water recycling, more efficient industrial users and agri-processors, the adoption of more water

efficient irrigation technology, residential water storage tanks, judicious use of ground water

reserves and small off-stream farm-dams could contribute to greater economic returns on the

available water resource. But technology on its own will not suffice; globally the efficiency gain

in industrial and agricultural water use between 1990 and 2004 was only 1 per cent per annum

(McKinsey, 2009). The overarching need is for better water governance. Water governance is

complicated in that water is simultaneously a social, economic and environmental asset, but

South Africa‟s National Water Act (1998) and National Water Resource Strategy (NWRS) (2003)

provide a comprehensive framework for managing the country‟s water in the face of competing

development needs.

The legislation acknowledges catchments as the unit of water governance, prohibits any private

water ownership, safeguards an “ecological reserve” for the maintenance of hydrological

systems and provides structured and progressive means of allocating the remaining water in

line with both economic and social interests (DWAF, 2003). Both the Act and NWRS have

received international acclaim, but have also proven extremely difficult to implement against

11

The country receives an average of 470 mm per annum, while the global average is 857mm per annum.

18

the backdrop of vested interests in historical water allocation patterns and an under-capacitated

Department of Water Affairs.

Water governance:

Water catchment boundaries do not align with municipal boundaries, but given that the

bulk of Theewaterskloof falls within the Breede-Overberg Water Management Area and

the Municipality has a vested interest in ensuring good water governance, the influence

of the Municipality on the Catchment Management Agency (CMA) is critical. The

Municipality is represented on the CMA‟s board, and should use this influence to ensure

that national water legislation gains local traction and serves local needs. Crucial in this

regard is the inter-basin transfer of water out of the Breede-Overberg catchment to meet

growing demands in the City of Cape Town - over 37 per cent of the surface water

resource in the Breede Basin in transferred in this way (DWAF, 2009). The CMA is the

key to managing these transfers and in ensuring that Theewaterskloof is suitably

compensated for the constraints that Cape Town‟s expansion is placing on its

sustainability and development.

A robust and proactive CMA would serve Theewaterskloof‟s green economy aspirations

in others ways too. It would, for example, become possible under the NWA to allocate

water that is realised by alien clearing and the introduction of grey-water recycling to

poor female headed households under the Act‟s Compulsory Licensing arrangement or

through General Authorisations. Such allocations would require commercial users

seeking additional water to purchase or rent water from these women, and render the

local water resource an instrument for social inclusion and equity.

Similarly a local application of the NWA would permit the marshalling of water in

support of employment creation or other mandated programmes, as opposed to locking

historical water allocations into the Theewaterskloof economy regardless of their merit.

Water differentiation:

Irrigation and stock-watering does not require residential drinking water quality. South

Africa‟s water is considered a “unitary resource” (NWA, 1998). Water can, however, be

differentiated at the local level in terms of its quality and reliability. Since different users

require different levels of quality and reliability of supply, differentiating at the local

level, can save purification costs, realise new water sources (such as grey water and

industrial effluent) and make more efficient use of existing water.

19

Plug leaks:

The cheapest source of water available to Theewaterskloof‟s expanding towns is, “The

water that is already supplied to [them]” (Turton, 2009). The figures are difficult to

establish but nationally up to 30 per cent of available water is “lost” between reservoir

and tap (IWA, 2008). Not all of this loss is leakage, some of it is due to administrative

and measurement errors, and in many instances managers already lower water pressure

during off-peak periods so as to reduce leakage. However preventing leaks through

pipeline maintenance in bulk and private infrastructure offers potential for significant

gains and is cheaper than constructing new supply side infrastructure. A programme

aimed at plugging leaks can, as with demand side management, generate some of its

own finance as water that is recovered is resold.

Promote efficient irrigation technology:

Agriculture and forestry account for roughly 95 per cent of Theewaterskloof‟s water use

(DWAF, 2009), but the gap between the best available irrigation and stock-watering

technologies and those used by most farmers in Theewaterskloof is wide, and widening

in the absence of technical demonstration days organised by the Department of

Agriculture. Uptake of more efficient irrigation technology represents a relatively easy

water demand management gain. By facilitating show-days in which farmers get to see

and learn about new technologies that are operating in Theewaterskloof, the rate of

technology absorption would be advanced and irrigation efficiency improved. The

Fruitways packshed, for example, makes use of a closed loop water system that saves

water costs and prevents the release of contaminated effluent.

Prevent contamination, especially from municipal systems and agriculture:

Contamination of Theewaterskloof‟s water resources reduces the amount of available

water, increases the cost of using water (see South African Breweries‟ efforts to purify

water from Theewaterskloof Dam in Appendix B), threatens the phytosanitary

compliance of fruit and vegetables produced in the area and causes disease and illness

for people and livestock. Water quality in certain Theewaterskloof rivers is known to be

compromised. Agricultural run-off, packshed and industrial effluent and towns that fail

to maintain patent bulk water and sewerage systems are the chief culprits. Measurement

using the Department of Water and Environmental Affairs‟ “Blue Drop” programme is a

start. Improving the impacts of Theewaterskloof‟s municipal water quality provides a

cost-effective means of reducing the economic burden of scarce water.

20

3.3 BUILT ENVIRONMENT AND THE SPACE ECONOMY

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Densification More people living in TWK‟s towns in mixed use buildings

Greater purchasing power in tows, shorter commuting distances, less habitat destruction for residential sprawl

Rural residential clusters

Up-market eco-villages living off-grid and independently of bulk services.

New residential opportunities to create purchasing power. Affluent market for clean technologies supports these sectors.

Sustainable low cost housing

SWHs, ceilings and gutters to be mandatory on low cost housing.

Ease financial and environmental burden on poorest residents by building better houses, saves money in the medium term.

Greening low cost housing

Less money spent on establishing trees and shrubs in low-cost neighbourhoods.

Locals paid if they are able to sustain trees and shrubs provided with public funds.

Green MIG for ecological infrastructure

MIG used to maintain and restore ecological goods and services.

Ecological goods and services provided to all TWK residents, and functionality of services retained.

The spatial the mis-alignment between people and markets – a direct legacy of the apartheid

space economy – continues to provide one of the defining structural constraints on the South

African economy. In Theewaterskloof this manifests as low residential densities in the rural

towns of Grabouw, Villiersdorp and Caledon, people living a long way from their place of work

and spending disproportionate amounts of time and money getting to their place of work, high

transaction costs for producers in getting their goods to markets and a lack of purchasing power

concentrated in the municipality‟s rural towns. Theewaterskloof‟s low urban densities are

linked to weak “agglomeration forces” (World Bank, 2009) and insufficient local market size to

support local businesses and industries or to attract new industries and investment. The result

is that Theewaterskloof‟s towns remain stuck in an “agricultural service-town” mode, and fail

to fulfil their economic and social potential. The same spatial form means that South African

towns are inefficient in their use of energy, materials and land. Public transport, including rail,

bus and taxi services are part of the solution (agglomeration economies only work if people can

access the opportunities), but transport is not within the Municipality‟s powers or remit.12 The

12

Local industries such as SAB, KROMCO and Appletizer in partnership with the municipality might enter into

collaborative partnerships with TRANSNET rail and port facility to ensure greater and easier mobility of their goods

and people, but this is at best a partial solution for the municipality.

21

Municipality can, however, control the built environment. The built environment defines the

relationship between people and the natural environment, and is central to the creation of

sustainable markets, the management of environmental impact and the nature of economic

development.

The apartheid state used spatial planning in towns and cities extremely effectively in the 1960s

to support its socio-economic ideology. The challenge for Theewaterskloof is to use space as

effectively to reverse the apartheid legacy and support a more inclusive socio-economic system.

Densification:

The Municipality controls the allocation of development rights, building designs and

spatial planning and could use this control to influence the nature and density of

residential developments, so as to create a critical purchasing power and financially

sustainable local businesses within Theewaterskloof‟s towns. Certainly, the main roads

and central business districts of towns such as Grabouw, Villersdorp and Caledon offer

considerably more economic, real-estate and social potential than is currently utilised.

Very few people live in the town centres and development is restricted to low-density

ribbon expansion of commercial property along the major roads, and retail at the

respective taxi termini. The flow of traffic and people in these towns is controlled by the

location of petrol stations, a casino (in Caledon) and franchised retail outlets. The towns

cater for “passers through” rather than seeking to attract permanent residents and their

money. They do not have public recreation space and do not have easily recognised

town squares that combine recreation, retail and residential property. The result is that

many people who work in Theewaterskloof live and shop outside of the region, and

businesses in the major towns often struggle to attain critical scale.

A town planning approach that creates residential space in the municipality‟s town

centres in multi-storey mixed purpose buildings is to be piloted in Grabouw by the

Grabouw Sustainable Development Initiative. The potential is to reduce transport costs,

generate a critical mass of local residents for local businesses, reduce the sprawl and

associated habitat destruction of existing residential developments and lower the unit

cost of service delivery.

Rural residential eco-clusters:

Theewaterskloof offers an attractive location for middle and high income households

who either work in Somerset West or Strand or are not required to be in the City of Cape

Town for their work. Such households represent purchasing power and investment

potential, but are restricted by the lack of suitable accommodation in the municipality.

22

They are unlikely to be attracted to the region‟s towns, even if they do embrace denser,

mixed-use property development, and struggle to find land and housing outside of the

towns without purchasing a farm. Whilst some Public Works and State forestry land is

available, the process of alienating this land from State entities for private development

is protracted. Similarly the process of using private agricultural land for residential

development is restricted by the Subdivision of Agricultural Land Act (70 of 1970) and

its attempts to protect food security. It is proposed that the concept of food security

promoted by the Act has its origins in apartheid-era isolationist thinking, is outdated

and incorrect.13 As one farmer pointed out, he has a 12 hectare piece of land on his farm

that has no agricultural potential, is currently occupied by water thirsty pine trees but

could serve as a home for 6-8 houses with a mountain and dam view, fynbos gardens

and clean technology.

Challenging this Act and its implications represents a long-term process, but the

Municipality has the role of interpretation and application. It is proposed that clustered

developments on pockets of low-potential agricultural land be used for up-market

developments, with the intention of increasing investment and purchasing power in the

municipality. Such eco-clusters would only be possible with strong guidelines from the

Municipality. Necessarily these estates would have to exist without access to the

national electricity grid or the bulk water system, but the technologies to enable this are

available, proven, and falling rapidly in price. A combination of gas, photovoltaic energy

panels, solarwater heaters, rainwater harvesting, grey water systems and composting

toilets, can currently be installed in an upmarket house for a total of R150,000- R250,000

without any noticeable impact on services (Cohen, 2010)14. The type of houses envisaged

should be able to pay this premium.

In addition to enhancing purchasing power and facilitating investment, such

developments would generate ideas, showcase opportunities and attract the type of

industries and skills to the region that would see the formation of businesses that will

prosper when these approaches become the norm.

Sustainable low cost housing:

Making better use of existing commercial and residential property in the rural towns is a

component of the solution to Theewaterskloof‟s housing challenge, but even where this

13

While retaining food and fibre production is an important component of the Theewaterskloof economy, food

security is equally supported by the creation of viable markets and a wide number of options for accessing food.

14 http://www.mg.co.za/article/2010-12-23-unplugged-life-off-the-grid

23

is successful, the Provincial Government, in partnership with the Theewaterskloof

Municipality, will be required to build new low cost housing. The current approach to

building government housing requires a rethink – especially in rural areas where houses

tend to be poorly constructed from inferior products without consideration of the

natural environment or the socio-economic consequences of the lay-out or location of

these houses. More sustainable low cost housing offers multiple benefits: (i) adding

gutters would facilitate rainwater harvesting and reduce soil erosion and localised

flooding; (ii) solarwater heaters tend to last longer than electric geysers, reduce the

residents energy costs, save green house gas emissions and create a market for the local

industry; (iii) ceilings regulate internal temperature, reduce energy costs and make for a

healthier living environment; (iv) biodigesters collect sewerage from the neighbourhood

and convert this to energy and clean water, saving bulk infrastructure construction,

providing an energy source, saving water purification energy and providing a local

source of irrigation water; (v) magnesium (as opposed to calcium) carbonate cement

products save CO2 emissions in construction; (vi) designing settlements with public

spaces that are observed from the respective houses makes neighbourhoods safer.

Low-cost housing is not the place to experiment with unproven technologies, but many

of the well-proven technologies have the potential to save households money, save the

Municipality money over the long-term and deliver better services. It is incumbent on

the municipality to insist that contractors install these products. The MFMA requirement

to install “lowers cost” options in all instances need not be an impediment if the life-

cycle cost, and external costs are considered (De Visser, 2010).

Greening low cost settlements:

The need for greenery – trees, shrubs and groundcover – is a much cited need in low

cost developments. The reality is that greenery is often used as fodder, fuelwood or

building material and is expensive to irrigate and maintain. A municipal system in

which households are paid if trees that are planted by the Municipality or Province are

kept alive is more likely to succeed. Experience in Durban15 shows that where

incentivised in this way households find a variety of innovative ways to protect and

nurture greenery in their environment and that the approach is both more successful

and less costly than Municipal approaches involving water trucks and periodic

replanting.

15

Durban has run a “Tree-preneur” Programme

24

Green MIG and ecological infrastructure:

The Municipal Infrastructure Grant (MIG) is the largest conditional grant from National

Treasury to local governments. In 2011/12 Theewaterskloof will receive a R21.5 million

MIG allocation and will spend this on a range of water and sewerage projects. The role

of infrastructure and the services that they deliver are understood to be central to the

functioning of “developmental local government”. The reality is that municipalities are

struggling with the “triple challenge” of building new infrastructure, maintaining

existing infrastructure and using new infrastructure to contribute to poverty eradication

(Brown-Luthango, 2010), and whilst MIG allocation and expenditure has improved

considerably over the past decade, much of the infrastructure delivered has not been

well maintained or provided adequate services. At the same time, the environment, and

the value of services and goods provided by functional environments, has been a key

oversight in the roll-out of MIG (MXA, 2003). In a rural municipality such as

Theewaterskloof, the value of services provided by the environment – pollination, water

purification, provision of food and fibre to wild harvesters, soil nutrient recycling,

carbon sequestration, emotional well-being and tourism support – is probably greater

than the value of services provided by the municipality. Just as municipal service

delivery faces a number of pressures, so too is the value of ecological services under

pressure. Balancing the roll-out of traditional municipal services such infrastructure and

solid waste disposal, with the services provided by the natural environment represents a

key challenge for the green economy.

The Development Bank of South Africa (DBSA) with support from the South African

National Botanical Institute (SANBI) has made the case for permitting the maintenance

and restoration of “ecological infrastructure” with MIG grants, particularly where this

infrastructure contributes to municipal services and can provide these services more

cheaply than infrastructure projects creating more jobs in the process. It is a compelling

argument, and one in which National Treasury has expressed interest.16 Grabouw

already has a sustainability initiative operating with DBSA and has the institutional

capacity to run a trial project around this “Green MIG”. The soil carbon project

mentioned above, wetland restoration programmes, the tree-preneur programme used

for greening, solid waste recycling programmes, rainwater harvesting, composting

toilets and the clearing of alien vegetation from water catchments are all examples of the

type of activity that might be funded by the Green MIG. Where such a trial was

launched it would further distinguish Theewaterskloof as a place of significance and

innovation in the global green economy.

16

Ian Palmer, Anthony Black and Dave Savage are three Treasury consultants that would be useful in advancing

this idea.

25

3.4 INDUSTRY AND ENERGY SECURITY

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Wind farmers assisted in securing PPA & RODs

Bulk wind energy produced and consumed in TWK

TWK has an excellent wind resource. Localisation of a national industry. TWK gains international profile and benefit5s form a new clean industry. Local businesses have access to clean energy.

Co-generation of energy at industrial plants

Industrial plants using waste to generate electricity and avoid landfill methane

Local manufacturing New labour intensive manufacturing and maintenance of strategic RE and EE technologies

Local markets for technologies supported by local manufacturing and expertise that will be exported when the industry grows.

Green business hub Cluster development of green economy players running business off renewable energy and material recycling. Includes a logistics hub linked to rail service

Critical mass of green economy players developing markets and providing an attractive location for businesses and industries requiring a green profile. Cement or glass depot to reduce road freight, particularly on Sir Lowry‟s Pass.

Differentiate tariffs between peak and non-peak

Cheaper electricity and more efficient use of available electricity, most notably renewable energy

Charging lower prices for off-peak electricity and higher prices for peak electricity is permitted by NERSA and would encourage companies and households to run non-essential items during off-peak, thereby smoothing the demand curve.

Net metering Allow industrial and residential electricity meters to run in two directions

Incentivise local electricity users to install localised energy generating devices so a to reduce their energy consumption

Waste to energy Landfill content used in combustion. “Excess” solid waste transported to cogeneration sites instead of Overstrand landfill. Later landfill methane used as an energy feedstock. Avoid transport of solid waste to Overstrand.

Theewaterskloof has 4 landfill sites all of which pose problems for the Municipality. South Africa‟s waste has a high energy content and burning it in a controlled environment can provide energy and reduce the solid waste burden.

26

The influence of different energy source decisions on development pathways has, in the past,

not been widely acknowledged. Yet energy choices are coming to be viewed as critical,

particularly as the consequences of fossil fuel-intensive industrial pathways become apparent in

the form of macro-economic instability and environmental impacts.

Globally the energy system is in a state of unprecedented flux: as Jeremy Bentham of Shell‟s

Global Business Environment points out, “Everybody knows that the energy system a century

from now will be very different from that of today”. There are three fundamental variables in

the global energy regime: “demand”, “supply” and the “environment” and it is the need to

simultaneously consider challenges to all of these variables that is driving change. Energy

demand in Theewaterskloof is highly correlated with population size and economic growth.

Energy is an essential component of Theewaterskloof‟s development. Theewaterskloof needs

more energy, needs to make better use of its energy and needs to ensure that its choices of

energy do not contribute to climate change and water resource depletion, and ultimately

become unviable. Theewaterskloof currently receives almost all of its electricity from Eskom.

Generation of this electricity relies on coal for 93 per cent of feedstock and incurs between 4 per

cent and 30 per cent transmission losses in being transported from the East Rand to

Theewaterskloof. The Municipality is fortunate to have considerable natural wind and solar

energy resources, and any utilisation of these resources would represent a localisation of the

national energy sector with positive employment and investment implications. A local

renewable energy sector would also allow greater surety of supply, more control over the cost

of energy (the cost of renewable energy is not subject to commodity price fluctuation) and

would avoid some of the adverse climate change and water implications associated with the

burning of fossil fuels, not to mention the safety and health issues associated with the burning

of wood and paraffin.

Bulk energy supply and bilateral agreements:

Environmentally, socially and in terms of balancing supply and demand,

Theewaterskloof needs to seek a new energy regime. Pursuing a local energy industry is

in the interest of the local economy. The supply of renewable energy represents a

strategic opportunity for Theewaterskloof. The municipality has an outstanding wind

resource and has attracted a number of registered Independent Power Producers (IPPs)

hoping to receive the attractive National Energy Regulator stipulated feed-in tariffs.

Power purchase agreements from Eskom‟s Single Buyer Office, represent the missing

key to releasing this investment, and Eskom should be expected to continue their

obfuscation and delay tactics so as to retain monopoly power. The current best case

scenario is that the first round of power purchase agreements will be issued in the third

quarter of 2011 (Jawitz, pers comms).

27

For aspirant energy providers, the choices are limited and they require as much support

from the Municipality as possible. IPPs hope to feature in the Department of Energy‟s

“Integrated Resource Plan” so as to receive power purchase contracts, but many are

simultaneously seeking off-take agreements with large industrial energy consumers.

Local industries such as SAB Maltings and Kromco seeking price stability, energy

security and reduced carbon footprints for market access may enter bilateral agreements

with energy suppliers and either lay their own electricity cables (if the distances are

short) or seek a “wheeling agreement” with the grid. Under wheeling agreements the

grid is effectively leased to relay a quantum of energy from producer to consumer.

Clearly the exact electrons consumed are not the same as those produced, but this

concept has been used by the City of Cape Town, for example, to transfer electricity in

its bilateral agreement with Darling wind farm.

Independent power producers do require an Environmental Impact Assessemnt (EIA) to

qualify for PPAs. By assisting these companies in obtaining a Record of Decision (ROD)

on their proposed developments the municipality can facilitate the emergence of this

sector.

Co-generation:

A number of Theewaterskloof industries have made use of EB Steam‟s favourable

agreement with Eskom to draw down relatively inexpensive on-sight energy. As EB

Steam‟s prices begin to converge on conventional Eskom process and carbon taxes are

levied, industrial users are beginning to look for alternatives. Local cogeneration using

cellulosic biomass is an option explored by Appletiser, SAB Maltings and Melsetter

Group. Co-generation is a feature at many of the country‟s sugar mills. Making this

energy affordable in the absence of a carbon tax is currently difficult, but the technology

is improving rapidly and costs are falling. Crucially it provides industrial users with

stable energy costs and tends to be more labour intensive than the burning of fossil fuels

(see Table 1). Sourcing enough biomass (prunings, chicken manure, saw-mill residue,

paper waste) to ensure plants operate all year round can be difficult. The company

Envirovest has promoted the planting of on-sight bamboo in South Africa to supplement

biomass feedstock.

Table 1: Jobs per energy source

Fossil fuel

Technology

Jobs/ GWh Renewable

Technology

Jobs/ GWh

Coal (current) 0.3--7 Solar thermal 8.7-10.4

28

Coal (future) 0.7 Photovoltaics 6.2 – 12.6

Nuclear 0.1-0.08 Wind 5.6

Nuclear (PBMR) 0.2 Biomass 16.3- 23

Gas 0.1-0.13 Landfill 1.34 -23

Liquid fuel (diesel

and paraffin)

0.1 Hydro 1

Bioethanol 3.8

Source: Austin et al (2003); WC RE Plan (2007)

Local manufacturing:

The assimilation of renewable energy by the Theewaterskloof economy can, and should,

be combined with new industrial activity. In the United States the registration of new

energy patents has increased from 723 per annum in 2002 to 1,882 per annum in 2010

(Heslin Rothenberg Farley & Mesiti P.C, 201017) and both China and India insist on a

proportion of “local content” in all renewable energy installations. South Africa does not

have a national policy on local content and as a country South Africa lags the global

innovation frontier and will not, in the next 10 years, become a leader in the

manufacture of large wind-turbines or concentrated solar power technology – the head

start obtained by pioneers in these capital intensive sectors is simply too great. There is,

however, scope for developing local solarwater manufacturing hubs and for essential

auxiliary industries involving installation, maintenance and calibration to find a home in

Theewaterskloof. Where Theewaterskloof becomes known as a market for solarwater

heaters, it is legitimate for the municipality to lobby international manufacturers of the

key technologies to establish subsidiary plants in the municipality. A place such has

Theewaterskloof could market itself as a production centre for the Western Cape and

even the sub-continent, as these regions expand their renewable energy markets.

Green business, industrial and logistics hub:

In the context of local manufacturing, the Municipality is considering a “green” office or

light industry park at Botriver. By establishing a business or industrial cluster, and

ensuring the bulk services of energy, water, sewerage and solid waste treatment

required by this cluster were provided by renewable and sustainable technologies (the

17

http://www.hrfmlaw.com/practice_groups/practice_group.cfm?ID=24

29

technologies for which already exist), the Municipality would simultaneously achieve a

number of goals. It would create an attractive location for businesses seeking a

sustainable or low-carbon profile, create a market for local technologies at the location,

establish a collection of like-minded companies that might foster collaboration and

innovation amongst themselves and raise the municipality‟s profile as both a business

location and a pro-active participant in the green economy.

Where a hub included a glass, cement or rail depot, it would permit the use of rail

freight for the transport of these items, and reduce truck traffic on the N2 that currently

runs deliveries to the growing towns of Hermanus, Villiersdorp, Grabouw and Caledon.

Alleviating truck traffic on the Sir Lowry‟s Pass section of the N2 in particular is in the

interests of trick drivers, road engineers and motorcar drivers.

Differential energy pricing:

The National Energy Regulator of South Africa (NERSA) permits local authorities to

charge end-users differential rates for peak and off-peak energy. The intention with such

differentiation is to incentivise households and companies to run non-essential

appliances during off-peak periods and to reduce the extent of peak electricity demand.

Were Theewaterskloof to adopt differential pricing it would pioneer this sensible

approach in South Africa, possibly reduce expenditure on electricity (depending on how

the differential was structured) and reduce the peak that any local Independent Power

Producer would be required to supply.

Two-way metering:

Ideally everyone, from households to industrial plants would be able to purchase

electricity from the grid and supply electricity back into the grid from their photovoltaic

panel, cogeneration plant or micro-wind turbine. Managing such a polycentric supply of

energy requires clear billing and grid stabilisation policies but remains the target to

which every local authority should aspire. In the mean time NERSA has permitted some

industrial plants to run their electricity metres backwards – effectively reducing their

electricity bill when they supply electricity at the same tariff at which they purchase

electricity. The Stellenbosch wine farm, Villiera, has pioneered this approach. Adopting

this approach in Theewaterskloof would represent a first step towards a decentralised

sourcing of energy in the municipality and incentivise investments in localised energy

generation.

30

Solid waste to energy:

Theewaterskloof currently has four landfill sites only two of which are registered.

Farmers have increasingly sorted their waste at source over the past 15 years, and now

drive a regional recycling business. Municipal waste, however, continues to be a

problem. A provincial study suggests that a large portion of the Western Cape‟s solid

waste is combustible – either as compost or to generate heat and energy. Textiles have

the highest energy content (58 MJ/kg) followed by wood (24 MJ/kg) and mixed paper

(16 MJ/kg). In the long-run large solid waste sites in South Africa aim to have facilities

for methane extraction and flaring for energy. In the immediate term Theewaterskloof

could sort the high energy solid waste and use it as a supplementary feedstock in the

cogeneration plants that support local industry, or in combined heat and energy plants

at local hospitals and municipal buildings.

Certainly the current arrangement whereby 450 tons of “excess” solid waste is

transported to Karweiderskraal in Overstrand every month at considerable cost and

energy expenditure, offers scope for improvement. Even if this waste was sorted and

transported to one of the planned local cogeneration sites it would be less costly and

more productive for the Municipality.

3.5 INNOVATIVE FARMING AND BIODIVERSITY

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Disseminate best farming practice

Improved agricultural efficiency

Easy scope for improvement in narrowing the gap between best and worst practice

Generic farming compliance

Collective risk management. Less costly and time-consuming market compliance for farmers

Generic standards for Theewaterskloof farming to be documented and applied and used to

Terroir mapping Less resource intensive agriculture

Better alignment of agriculture with the natural resource and climate base so as to ensure high yields and less chemical and mechanical inputs.

Add local value Agri-processing, increasing local market, reduce transport costs and more direct links between producers and markets

Transport costs represent an increasing component of the agricultural value chain and of input costs.

31

Climate change adaptation

Climate aware farmers with adaptation options

Farmers are already adapting to warmer and more variable climates by a variety of options, knowledge and experience needs to be shared throughout the industry.

Agriculture is at the core of the Theewaterskloof economy and will remain so. The region has a

proud agricultural history having pioneered the first organic export apples, the cut flower

industry, integrated pest management and a generic carbon calculator designed for the region‟s

deciduous fruit growers. The challenge for the Theewaterskloof agricultural sector is to remain

competitive (not a given in the context of global agriculture), comply with growing pressure of

retail outlets to report on and reduce environmental impacts and generate employment. The

institutional and human resource capacities within Theewaterskloof agricultural sector make it

the ideal place to conduct biotechnology and agri-innovation pilots that, if successful, can be

rolled-out elsewhere. Equally the Theewaterskloof agricultural sector should be well-placed to

participate in provincial Department of Agriculture‟s “green farming” competition, with its R1

million first prize.

Agri-processing has become a mantra for the South African agricultural sector. Theewaterskloof

already has a measure of agri-processing and there is talk of further developments including a

cider plant and agri-tours. It can be assumed that these businesses will develop on their own, if

only because increasing transport costs will require producers to add value locally so as to

reduce the unit cost of transport.

Disseminate good practice:

The easiest impact on the municipal agricultural sector involves disseminating existing

good agricultural practice more widely. Since agricultural deregulation in the 1990s the

gap between innovators and technology laggards has grown. There is scope for the

wider uptake of water efficient technologies, integrated pest management techniques,

soil stewardship, stock feed and vaccination innovations and energy management

approaches that are already being applied on the most successful farms in

Theewaterskloof. The uptake of these technologies is an industry issue, but the

Municipality could provide platforms and opportunities for the sharing of information

and particularly exposure to new technologies and practices by poorer, smaller

survivalist farmers.

Colors (Pty) Ltd have, for example, an ongoing experiment in which they are looking at

biochar18 as a means of improving soil quality and sequestrating carbon, together with

18

http://www.colorsfruit.com/QA/CMS/index.php?/site/content_page/biochar_project

32

the International Biochar Initiative. Sharing the result of this research (in a manner that

retains some advantage for Colors) could benefit the entire sector.

Farming compliance:

A related need involves the enabling of farming compliance processes within the region.

Food markets, particularly those in OECD countries, require stringent compliance

reporting as a prerequisite for market access. Country specific organic certification,

Fairtrade, HACCP, EuroGap, Halaal, Kosher, Soil Certification Standards are just some

of the audits that farmers have to prepare for and report on. It is an increasingly onerous

and expensive obligation for producers, especially as each of the standards has evolved

to represent an industry in its own right.

The Municipality is not in a position to oversee compliance, but by undertaking some

sub-sector wide improvement initiatives, such as the soil carbon programme, an

integrated pest management programme or the continued roll-out of the Biodiversity

and Wine Programme, the region may enhance its reputation as a place of good farming

practice and make individual compliance less of a burden. It would, simultaneously, be

good for the productivity and competitiveness of the all-crucial municipal agricultural

sector.

Terroir mapping:

The geography, geology and climate of a location determines the agricultural goods that

it is able to support. Alignment of crops and varieties with natural conditions was not a

feature of State controlled agriculture during apartheid. Correcting this presents the

potential for a more productive agriculture that requires fewer chemical and mechanical

manipulations. The requirement is for a Municipality-wide terroir mapping of the

Theewaterskloof region so as to inform farmers of the best crop selections at various

locations.

A terroir map for Theewaterskloof would not only raise the profile of the municipality,

but represent the logical next step after the bio-regional planning that as done by the

Western Cape in 2000. The bio-regional planning exercise was mandated by the (then)

national DEAT and involved mapping of biomes and other natural resource constraints

with the intention of informing development planning.19 It is not clear, however, that the

findings of the pan were ever assimilated.

19

http://www.capegateway.gov.za/Text/2003/bioframework_chap1to7.pdf

33

Figure 6: Western Cape biomes as delineated from the Western Cape Bioregional Plan (2000) an example of the spatial mapping of natural resources to which terroir mapping could add detail.

Climate change adaptation:

Global mean atmospheric temperatures are 0.74°C warmer than the long-term mean

(IPCC, 2009). Cartwright (2002) showed that in the Western Cape localised micro-

climates result in some areas warming faster and others slower than the global mean,

but that the general loss of chill units already restricts the varieties of apples that can be

grown in Theewaterskloof (Cartwright, 2002). The same temperature trends adversely

affect photosynthesis and respiration rates in the region‟s grain crop. The Deciduous

Fruit Producers Trust has noted the impact of chill unit losses for bi-colour apple

growers in particular, and certain grain producers are busy experimenting with more

resilient varieties.

To ensure the continuation of a vibrant agricultural sector, Theewaterskloof like rural

economies the world over, will have to continue monitoring temperature changes and

assist growers and livestock keepers of the changes and the available adaptation

measures. Fruit growers, for example, have been able to minimise the impact of sunburn

by installing overhead irrigation. Widespread adoption of a range of affordable climate

change adaptation measures will ensure the continuation of Theewaterskloof‟s chief

economic sector.

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3.6 INNOVATION AND THE KNOWLEDGE ECONOMY

Key programmes and targets

ACTION OUTCOME PROCESS & RATIONALE

Knowledge partners for innovation

Documentation of lessons learnt, introduction of new technologies, cutting edge research conducted, profile as innovative region raised

On-going research is important for solving complex problems and creating capacity.

Research partnerships for sustainability

Investment in sustainability research for TWK

Proximity to Sustainability Institute and orientation of TWK development provides for research collaborations.

Schools programme for action research

Schools conduct sustainability projects.

Awareness raised among learners

Schools link to global Earth Hour

Theewaterskloof schools promote earth hour among their learners and use it as an education opportunity

Earth Hour has become the worlds largest voluntary action campaign. Identifying with it networks children globally and allows them to learn about and understand the issue

Innovation is a prerequisite for survival in the modern global economy. Countries such as South

Korea, that have successfully harnessed innovation, have experienced sustained economic

growth. South Africa‟s Medium Term Strategic Framework states that “Science and

technological innovation and development are important sources of industrial competitiveness

and sustaining growth” (Presidency, 2009), but investment in innovation in South Africa has

not tracked the global change. Energy sector innovation in particular has lagged South Africa‟s

peer countries. South Africa currently spends 0.9 per cent of its GDP on R&D, with an unknown

but very small component of this going to items that could be considered part of the green

economy (CeSTii, 2010). Theewaterskloof cannot rely on the national innovation system if it is

going to realise green economy potential and while the municipal innovation system is

unavoidably nested within national human capital and innovation effort, Theewaterskloof

needs to shape its own innovation trajectory.

Knowledge partners for the innovation economy:

An innovative economy is dependent on long-term investments in education and the

raising of the human capital stock. Theewaterskloof cannot address the education crisis

in isolation, but it can retain and seek to retain and harness the skills it has and that it

35

develops and it can attract outside skills to the region. The municipality already has a

number of innovative companies and innovative individuals that should be encouraged

and enabled to pursue their innovations so as to initiate a process of learning by doing

(see Appendix B).

The pace of technological change and the rate of learning that characterises the green

economy places a premium on knowledge and the ability to generate and use

knowledge. Capturing the knowledge that emerges as Theewaterskloof undertakes the

“learning by doing” that characterises many of the ideas identified in this scoping study,

may be more valuable than the programmes and respective projects. Certainly it will

ensure the type of capacity that can sustain the green economy.

Documenting the process and capturing the knowledge products is typically the role of

“knowledge partners” and as such knowledge partners represent a key in converting the

existing innovations into an innovation economy. Knowledge partners may include

universities, large NGOs (such as WWF, UNEP Project 90*2030 or Sustainable Energy

Africa) or the former technical colleges (Elgin Learning Foundation), or research

programmes. Regardless of their profile they should bring a sustained input of new

ideas to the Theewaterskloof environment and represents the municipality‟s successes,

failures and learning to a peer review audience and to the international community.

There is much to interest potential knowledge partners in Theewaterskloof: the existing

agricultural innovation, the planned renewable energy plants, the challenge of

simultaneously managing ecological and social constraints, Caledon‟s warm springs and

the use of these springs by indigent people prior to the “founding” of the town 300 years

ago, the intricate water governance (and balancing) that takes place within the region,

the sustainable use of the region‟s ground water, a solarwater heater industry incubator,

the relationship between endemic plant species and the growing wine industry, the need

for spatial reform of the local towns, the documenting of energy and material flows

through the municipality with the intention of reducing these, adapting to climate

change in the municipal agricultural sector, the role of medicine and primary health care

in coping with the HIV/TB complex, foetal alcohol syndrome. All of these could (and

many already do) form the basis of internationally relevant research and be used to

attract research funding.

People working on these issues bring their research grants, their need for food and

accommodation and most importantly their knowledge to bear on the local economy.

They simultaneously raise the profile of the region in their publishing of academic

papers, technical reports and conference presentations. Singapore, for example, is

becoming recognised as a global “Hydro Hub” (McKinsey, 2009). Public sector support

36

and mobilization of private sector investments, has contributed to a research base for

environment and water solutions. The intention is to increase the returns to the

country‟s water resource by 300 per cent by 2020 and to generate 11,000 professional and

skilled jobs by 2015. On a lesser scale, but following the same rationale and principles,

municipalities such as Theewaterskloof in South Africa can distinguish themselves

within the country and seek international recognition for their proactive, novel and

successful green economy initiatives.

Establishing long-term relationships with knowledge partners is a prerequisite for

effective participation in the green economy.

Figure 7: A knowledge economy is an essential component of Theewaterskloof’s green economy. Such an economy necessarily involves partnerships with knowledge partners. Theewaterskloof already has relations with Stellenbosch University, the Elgin Training Foundation, the Sustainability Institute the International Biochar Initiative and a range of NGOs. There is much to interest these knowledge partners in Theewaterskloof’s existing and planned activities and longitudinal relationships with these partners can be used to draw key lessons from pilots, introduce new technologies, raise the profile of the region and attract investment. An effective knowledge economy contains both policy and issue engagement, includes research and publications, teaching and capacity building.

Establish a local think tank:

Theewaterskloof is proximally located to Stellenbosch University‟s Sustainability

Institute (which was involved in the National Green Economy Strategy early in 2011)

and the Grabouw Sustainable Development Initiative is already established as one of

five national pilots funded by DBSA.

As its contribution to this partnership, Theewaterskloof would do well to assist in

bringing its own human resources in the green economy together for periodic (say

37

quarterly) gatherings. The municipality is home to a community of academics, existing

and former business leaders, designers, entrepreneurs and innovative business people.

Collectively these people provide the municipality with the capacity to generate new

ideas, screen proposals and shape the trajectory of the municipality‟s green economy.

Facilitating the formation of a “think tank”/ “reference group”/ “action committee”

from amongst the existing population would be to draw on the available skills and

experience for public benefit. The type of people that would attend such a group tend to

be busy. The intention should not be to burden them with additional, open-ended

meetings, but rather to use their experience to develop focus and informed decisions –

the feedback sessions on Theewaterskloof‟s 2030 Strategy show the level of commitment

that is available in Theewaterskloof for focussed, well-managed public meetings.

Schools programme for action research:

An equally important component of Theewaterskloof‟s knowledge economy and its

linkages with the green economy involves schools. A 2030 strategy necessarily needs to

look at the type of people who will be decision-makers in the municipality in twenty

years time – current school children and to communicate key messages in a language

that they will comprehend. Project 90*203020, operates a programme in Western Cape

schools that raises awareness of climate change and challenges schools to reduce their

emissions by 10 per cent per annum while providing them with practical means of doing

this. The programme has had some success in cutting greenhouse gas emissions from

the schools in which it operates, but has been far more successful in creating climate

sensitive learners who feel capable of managing their own emissions.

4. WHAT ROLE FOR THE MUNICIPALITY? The onus is on the Municipality to provide the leadership, resources, planning permissions and

legislation that will enable other players to pursue green initiatives.

It is the intention of this document that the green economy be understood as something that is

unavoidable and affecting and involving everyone. People and companies are already coping

with environmental risk and resource scarcity in Theewaterskloof. The role of the

Theewaterskloof Municipality is to support the process and to shape “how” these solutions

unfold. Uncoordinated responses tend to be more costly and to transfer risk to the environment

or to less vocal or well resourced people that are poorly equipped to cope with this risk.

20

http://www.90x2030.org/

38

The role played by the Theewaterskloof Municipality in enabling the green economy is a matter

of political economy. A range of options are available. The rapid and cohesive gains that a

countries such as China and Denmark have made in the pursuit of green economy enterprise,

suggest that some government involvement is required. Without clear guidelines and some

assistance, it is unlikely that the form and function of Theewaterskloof‟s towns will alter or that

builders of low cost housing will incur additional costs in installing renewable energy and

energy efficient technologies. At very least an entrepreneurial interaction between the

Theewaterskloof Municipality and its local residents and businesses is required in the pursuit of

clearly defined objectives.21 This hybrid approach draws on a combination of markets and

government programmes, acknowledging that markets themselves are human constructs that

require regulation. Some guidelines are provided below:

Vision and agenda:

The Municipality can determine the guidelines within which private developments take

place and can and set examples as a large employer and consumer in the region. The

2030 strategy is a key component in the process of articulating a vision, but there remain

tensions between the needs of property developers and conservationists and

environmentalists on issues of development and expansion. The environmental lobby

point to the proliferation of petrol stations, fenced estates, golf courses and shopping

centres that perpetuate the type of business expansion that does little for human

development while using up scarce resources such as water. Property developers cite

the level of their investment and job creation as crucial to any development process.

Both parties typically end up frustrated, with property developers in particular

lamenting the need for environmental impact assessments and public consultation.

It would assist all parties if the Municipality articulated a clear vision and agenda as to

the types of development that will be approved and supported, based on its

understanding of the regional environment resources and constraints and social needs.

Such an articulation would assist developers in crafting their proposals in line with

guidelines, and avoid the frustration and cost of mal-aligned planning proposals.

21

This approach to industrial policy is once again in vogue in the post-financial crisis era. Japan’s prime minister,

Naoto Kan, said in April 2010 that the government wanted to create a new “Japan Inc”, deepening the links

between business and the state. Barack Obama said in 2009 that his government must make “strategic decisions

about strategic industries”. His stimulus plan last year earmarked billions for innovation in sectors such as

renewable energy, high-speed rail and advanced vehicles. In 2009 Britain’s Labour government set up a Strategic

Investment Fund to steer £750m ($1.2 billion) of state money to particular industries and companies.

39

Governing the commons:

Lessons from Cape Town‟s State of the Environment Report suggest that individuals

and companies can (and have) successfully take responsibility for the things over which

they have control. As a result energy and water efficiency has improved in Cape Town,

recycling has commenced and there is a growing awareness around food safety and

transport patterns. There are other issues over which individuals can exert little control

or for which private incentives to deplete resources or generate pollution are greater

than the incentive to act in the collective interest and conserve or prevent pollution.

These public goods – or “commons” - require government intervention by way of

legislation or incentive programmes. Whilst markets and individuals can be expected to

take up most of the responsibility for the things over which they can exert sufficient

control, the lay-out of towns and transport networks, the management of the regional

water resource, the setting of emissions reduction targets require government

intervention before individual and companies can be expected to take up responsibility.

Identifying the public goods and “commons” for which private or market incentives will

lead to undesirable outcomes is not easy. It is, however, essential if the Municipality is to

select the right places to intervene and contribute to green economy governance.

Show-case good practice:

The green economy requires change, which in turn requires innovation which in turn

implies new physical technologies and social and institutional arrangements. The

innovation frontier is moving with increasing speed across an increasing breadth of

ideas. This is a dynamic environment in which “locking–in” to a single solution or

technology comes with the risk of being declared obsolete when an alternative or

improvement is developed. Government institutions do not have a good track record of

selecting the best technologies and options (”picking winners”22) as part of their

industrial strategy (Pascal, 1983). Whilst a government commitment to renewable energy

is required, the choice of which particular renewable energy technologies to develop is

the role of private companies with their particular market analysis and risk hedging

strategies.

The municipality can, however, foster good practice and the uptake of technologies by

showcasing things that have worked and promoting companies that have made a

contribution to the green economy.

22

See http://www.economist.com/node/16741043 for a recent opinion of picking winners in the green economy.

40

Establish partnerships:

The green economy involves all sectors, many technologies and an interaction of ideas.

As a central component of its enabling role, the Theewaterskloof Municipality should

use its oversight of the municipal economy to link local businesses that would benefit

from interaction, and to link local business with ideas and businesses outside of the

municipality and country. The goal is collaborative partnerships between business,

communities and government that deliver on the complex and different needs of the

different parties. Where these partnerships involve “unequal” partners – as is often the

case in community-business collaborations – the Municipality has a mediation and

support responsibility. To this ends the Municipality has already established a

“Partnerships Officer” a post that has strategic responsibility to the region‟s green

economy.

Disseminate information, provide clear legislation, draw down subsidies:

As a minimum Theewaterskloof has a responsibility to provide clear information on its

application of national and local legislation and its strategic orientation. As Johan

Rockstrom of the Stockholm Resilience Centre points out, clear guidelines, even where

restrictive, are the key requirements of good business.

The national policy environment on energy prices, the implementation of a carbon tax,

the allocation of REFIT tariffs, the status of the “ecological reserve” contribute to

uncertainty23. Theewaterskloof would do well by seeking clarity on some of these issues

on behalf of its residents and in other instances adopting local legislation that provides

clarity.

A component of this certainty involves assisting local businesses in accessing national

and provincial subsidies for green economy activity. The national industrial strategy, as

it relates to the green economy, is perplexing. Eskom provides rebates for solarwater

heaters, but the level of rebate and the types of systems that qualify, shift and the

mechanisms for accessing the rebate are vague. The REFIT is attractive to investors, but

the process of awarding all important PPAs via the IRP process is opaque. The

Technology Innovation Fund has a large budget, but no guidelines over who or what is

eligible for support. NERSA allows reverse metering but it is not known how this is

activated. Treasury has levied a R0.02 per kWh “carbon levy” on all electricity since July

2009, but it is not known how this considerable fiscal resource is being spent at the local

23

The National Water Act has potentially transformative implications for the local economy, but its interpretation

and the schedule of its role out are unclear.

41

level so as to reduce carbon emissions. Assisting local businesses in accessing fiscal

support measures for their activities in Theewaterskloof will not only stimulate

investment but also boost these businesses.

Finance and investment:

Investment is a necessary component of the structural shift towards a green economy

and the management of existing environmental risks. Some activities and options

immediately save costs (such as behaviour changes that result in less energy

consumption), but others require lumpy up-front investments that then yields a stream

of benefits over their lifetime (such as solarwater heaters or the building of greywater

recycling plants). In the latter category of options, finance is required and the riskiness of

the market sometimes requires public finance to complement private finance – the REFIT

provides a good example. Structuring public finance without creating moral hazard is

always tricky, but the aim should be to overcome market failures, to crowd in private

investment and to generate valuable learning. As the UNEP diagram below illustrates,

the suitable financing instruments typically change over the lifetime of a programme or

a technology.

Figure 8: Typical financing sequence of sustainable energy technologies showing role of public finance

In exchange for fiscal contributions, Theewaterskloof should look to secure the

knowledge that emerges from “learning by doing” for public benefit. The fast moving

and knowledge intensive nature of the green economy will render knowledge more

42

valuable than most capital or projects. Provided the knowledge that emerges from

programmes and projects remains in the public domain, some fiscal subsidisation of

capital can be justified. For example, were the Municipality to subsidise the installation

of SWHs, it would be imperative that this be accompanied by learning with regards to

the best technologies, the best installation techniques and the extent of household energy

and budget savings that these installations permit.

Oversee the Community Trust:

A special finance case involves the Theewaterskloof Community Trust that is being

established by spirant wind farmers looking to demonstrate their commitment to Broad

Based Black Economic Empowerment. The trust represents both risks and opportunities.

The proposed financing structure of the initial wind-farming deal is potentially lucrative

but also places financial risk on the empowerment partners. The wind farming proposal

highlights two important roles the Municipality will be required to play as the trust

develops: (i) Scrutinise the financing agreements so as to secure legitimate benefits for

the trust. (ii) Oversee the effective deployment of trust funds (together with other

trustees).

A good trust deed is necessary but insufficient to ensure that the trust serves its purpose.

The history of trusts as empowerment entities in the agricultural sector illustrates that

they can become management intensive, contested and vehicles of corruption. A

community trust in Theewaterskloof could pioneer a new means of ensuring social

benefits from lucrative corporate activities, but only if it is effectively managed. As a

trustee the Municipality has a role to play in familiarising itself with some of the pitfalls

of past community trusts24 and exercising its trustee responsibilities with diligence.

Negotiate for land and space:

The constraints on available land and resulting space economy have been discussed.

What is less frequently acknowledged is that government – via its various spheres and

agencies – own considerable land in Theewaterskloof and releasing this land for

municipal use and development can be complicated as the Eikenhof Dam development

has illustrated. If the constraints of the Theewaterskloof space economy are to be

addressed, the municipality needs to continue negotiating for the land that is required to

24

The Department of Land Affairs and PLAAS at UWC have conducted research on the impact of Farmworker

Equity Share Schemes that is instructive in this instance.

43

transform Theewaterskloof into a functional and sustainable municipality. The

Constitutional obligations on local governments should form the basis of these

negotiations; they cannot be fulfilled without influence of the municipality‟s space

economy.

Communicate success, generic regional marketing, showcase at COP and Rio+20:

Theewaterskloof‟s 2030 Vision and green economy planning already distinguish it in a

world that is desperate for local-level examples of change and progress. Leveraging this

distinction to gain profile, visitors and investment is possible for Theewaterskloof. The

Brazilian city of Curitiba (population 1.7 million) has become identified internationally

as an example of green economy success on the back of one successful public transport

programme. In 2010 Curitiba received 1,100 South Korean researchers interested in

seeing and learning about the town – a small example of the tourism and research

interest that perceived success generates.

As Theewaterskloof rolls-out its 2030 vision and green economy strategy, the

Municipality should ensure that the region and its pioneers receive their due acclaim. As

a very minimum Theewaterskloof should be looking to secure an exhibition at the

Conference of Parties (COP) 17 in December 2011 in Durban so as to showcase its plans

and private sector partners. In addition Theewaterskloof should be looking to represent

at the Rio+20 (Earth Summit) in 2012 which will be dedicated exclusively to the green

economy.

Locally, Theewaterskloof should be looking to identify itself as a pioneer and national

test-bed for green economy ideas under the provincial Greencape initiative.

Communication, and particularly the communication of success, is the key to these

events and ensuring that local residents participate and take ownership of the green

economy. Table 1 outlines the means by which Theewaterskloof‟s green economy can be

communicated to different stakeholders so as to elicit their support and link them into

global networks. This communication and generic marketing is the role of the

Municipality. Clear and effective communication represents an increasingly specialised

skill with a rapidly growing support industry. The Municipality already has an

interactive web-site (with a blog spot that awaits activation), with concise information

and appealing visuals. The need is for the effective use of various media facilities,

including the internet, to communicate particularly around the success stories.

44

Table 2: Messaging, networks and platforms for communicating the Theewaterskloof green economy to different stakeholders

AUDIENCE KEY MESSAGE NETWORKS & PLATFORMS

Development community

Can accelerate growth, can use local resources, can be low cost, have a right to develop but not to repeat the mistakes of OECD countries.

ICLEI, C40 alliance, UN-Habitat, United Cities and Climate Change (UCLG)

Labour The green economy involves more jobs, new jobs, safer jobs. Green economy is necessary for the industrial policy action plan (IPAP)

Cosatu, ILO, UNEP, Economic Development Department, National Department of Economic Development

Economics community - Provincial government, treasury and LED audience

Green Economy presents a viable growth model. Not the best growth path but the only growth path. More efficient fiscal allocation – Green MIG, eco-efficiency. Not about picking winners but about constant innovation. Green economy is compatible with, and necessary for, the industrial policy action plan (IPAP)

Greencape, National Planning Commission, DBSA, trade forums, UNEP Green Economy, Rio+20.

Media Green Economy is topical and newsworthy. This is not a passing fad. Communication is essential to creating the required network and awareness.

Media industry. New media industry

Industry & business Business as usual does not exist. Green economy is the only viable growth model. Can involve a better business. Key to competitiveness and market access. Can yield efficiency gains. The green economy involves a “relatively surprise” free business model and less liability. Being involved presents the opportunity for policy capture. Getting involved presents the opportunity to build deep cultural and emotional commitments to the firm – doing the “right thing”. The world‟s leading companies are already involved.

Trade shows, Business Chambers, Human Resources training, green branding.

NGOs Green economy is about values, a more honest economics, livelihoods and savings. International donors require local NGOs in this space. Local communities require NGOs for support.

Faith based and NGO network, WWF, UNEP.

Youth Green is the next economy. It ensures a future and allows you to be part of a global network. The green economy is cool and different to the past.

Schools, social networks.

Academia The green economy is innovative and research and knowledge intensive. Green economy requires a community of learning and creates opportunities for applied research partnerships. The green economy accommodates and requires a range of disciplines.

Conferences and research products. COP 17, Rio+20.

45

5. BUSINESS OPPORTUNITIES, AND EMPLOYMENT

POTENTIAL Whilst the Municipality has an oversight and leadership role to play in supporting a green

economy in Theewaterskloof, the success of this economy will depend on the creation of viable,

new business opportunities.

Effective businesses identify and pursue their own opportunities, but the table below highlights

some of the apparent opportunities. Crucially these business opportunities tend to be labour

intensive and generate new employment relative to existing sectors or the absence of these

sectors. In some instances the activity involves localising sectors that currently take place at the

national level, with the associated employment gains for the municipality.

Table 3: Green economy business opportunities and employment potential

SECTOR ACTIVITY EMPLOYMENT POTENTIAL RELATIVE TO BUSINESS AS USUAL

Services Green design and bio-mimicry Energy and resource efficient architecture Consulting in renewable energy and demand side management Soil scientists to map terroir and sol carbon Carbon measuring and trading Conservation as a form of “ecological infrastructure”/ green MIG Energy monitoring and conservation Water governance at CMA, town and company level Riparian and river rehabilitation, alien removal Green marketing of companies, programmes and the region

Neutral Neutral High Neutral High Neutral Neutral Neutral High Neutral

Energy Photovoltaic installation and maintenance SWH installation and services Utility scale project renewable energy management Biomass collection for use in cogeneration Net metering Supply renewable energy

High High High High Neutral High

Infrastructure Low cost housing construction for sustainable communities Lay-out of public spaces, squares, pedestrian retail areas. Grey water and water harvesting systems Linking ecological infrastructure with built environment

Neutral Neutral Neutral Neutral

Manufacturing SWH and demand side management appliances Photovoltaic panels Biodigesters Water efficient irrigation hardware

High High High

Materials and Carbon neutral brick manufacturing Neutral

46

construction Building ecological infrastructure Low carbon building materials (wood, MgCO3 bricks)

High Neutral

Education and research

Develop school curricula Run school and adult education courses Fieldwork and research Publications and desk-top media

Neutral Neutral High Neutral

Establishing the reasons why companies might participate in the green economy is important. A

range of motives are legitimate and if the Municipality is to support private sector involvement

it needs to support (and manage) the respective strategies of the private sector.

Table 4: Reasons for engaging the green economy (adapted from Harvard Business School)

REASON FOR GREEN ECONOMY ACTIVITY INTERNATIONAL & LOCAL EXAMPLES

Connecting employees with values so as to improve the

human resource

Marks & Spencer, Thandi Wines, SAB Maltings,

Appletiser

Anticipating major risks before competitors, shifting

resources

Swiss Re, Colours, Capespan

Best in class technology, first mover advantage First Solar, Genesys Wind

Leveraging existing assets to enter new markets Siemens, General Electric, IBM, Cisco, SAB

Maltings, Cluver Wines, Melsetter Group, DBSA

Aggressive branding, reshaping customer preferences Toyota, Marks & Spencer, Unilever, Eletricall

Remaking the supply chain to reduce costs, increase

resilience

M&M Mars, Costco, Nike, Boeing, SAB

Maltings, Appletiser, Capespan

Moving proactively to capture policy Virgin, Caledon Spa and Casino

6. CONCLUSION There is a certain irony in the realisation that the sustainability of Theewaterskloof, a rural and

agricultural economy, will be determined by the success of the municipality‟s towns. It is not

that the agricultural sector does not present green economy opportunities, or that the

functioning of the natural resource base is not critical to the socio-economic well-being of the

municipality, but rather that Theewaterskloof‟s key challenges coalesce in the municipality‟s

towns. Accommodating and assimilating the increasingly urban population of Theewaterskloof

in a manner that does not destroy the natural resource base is the focus of policies leading to

2030.

47

The green economy is not a new sector nor a nice-to-have, but rather a prerequisite for

economic survival in a world of increasing environmental constraints. Business as usual will not

suffice, and while technological innovation has an important role to play in addressing the

challenges, the urgency and scale of the constraints requires technological innovation to be

accompanied by bold leadership and structural change.

The scoping study captures the extent of existing and planned green economy activity in

Theewaterskloof. It makes the case that Theewaterskloof confronts many challenges that are

common to the country and the international community but that the municipality has

remarkable human and institutional capacity to address these challenges and is of a scale – not

too large or too small – to allow for effective pilot programmes and experimentation. As such

Theewaterskloof is well-placed to pioneer green economy solutions for itself and the rest of

South Africa, and to gain an international reputation as a green economy innovator. This

identity could be particularly valuable in the build up to the “Rio+20”Earth Summit in 2012

which is dedicated to the green economy. The study describes existing activities and

opportunities that relate to carbon, water, the built environment and the space economy, energy

and industry, sustainable agriculture and the knowledge economy.

It is proposed that an internationally recognised green economy in Theewaterskloof is central to

retaining the region‟s markets and competitive advantage and to developing the new markets

and competiveness required to meet the municipality‟s changing socio-economic need. A key

challenge will be to pursue this economy in a manner that includes Theewaterskloof‟s poorest

residents; the green economy outlined in this document has more potential to create

employment and address the structural origins of poverty than the existing economy. Where

Theewaterskloof succeeds, there is the opportunity to transcend the national position on the

green economy, structural reform and employment creation. In so doing Theewaterskloof will

identify itself as a regional pioneer and join the small host of cities and local authorities that

receive international recognition and resources for their efforts to develop sustainably.

48

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52

APPENDIX A: PRINCIPLES OF THE GREEN ECONOMY Implicitly, the green economy represents a return to founding economic principles in which

externalities are internalised and prices better reflect what people value. Green economics

represents a departure from the focus on business economics that predominated the late-

Twentieth Century at the expense of classical economic theory, with its welfarist tenets. The

transformative potential of the green economy is based on the following principles:

i. Valuing of the common property resources (air, water, space, soil fertility, biodiversity)

that underpin economic value and make a particular contribution to the social welfare

safety-net, but the degradation of which is often not charged.

ii. Prices reflect value, and social and environmental externalities are not ignored simply

because they are not priced into firm‟s ledgers.

iii. Competitive markets that function in favour of full employment and wage convergence.

iv. The relationship between people and their environment is reconfigured through an

environmentally sensitive built-environment

v. Fiscal resources are allocated to small25, decentralised, knowledge intensive enterprises

that make limited use of finite environmental resources, and which draw efficiently on

renewable resources.

vi. Uncertainty is acknowledged and accounted for. From a management perspective it is

more valuable to “know that you don‟t know than to assume you do know when you

don‟t”. Ensuring that innate uncertainty is accurately imputed into economic analysis is

central to the green economy, which necessarily adopts long-term perspectives and

values precaution when confronted with incomplete information. Uncertainty stems

from a lack of knowledge about the drivers of change today and in the future, the

response of the climate system, social and policy responses to biophysical changes and

the way impacts will manifest themselves at the local scale.

Much of what constitutes the green economy at the national and international level

amounts to ideologies and exhortations, without ever engaging with the reality of economic

machinations. At the local level, the luxury of rhetoric does not exist. Section 5 of this

document focuses on Theewaterskloof Municipality and proposes specific ideas that

25

South Africa currently relies on large companies, many of them State-owned, for much of its economic activity.

Innovation and structural reform of these firms is essential, but in general, large firms tend to be capital intensive

and employ few people relative to the capital (including natural resources) that they require. The employment that

they do create tends to be highly centralised, and dependent on high skill levels. Smaller firms have capital:labour

ratios that are better suited South Africa’s labour surplus, and smaller firms are more capable of supplying

decentralised employment (Rogerson, 1999; Berry et al 2002)

53

collectively would constitute a greener economy in the region and ensure the sustainability

of the municipal economy.

Theewaterskloof requires a green economy to give meaning to the Constitutional obligation on

local governments to “Promote the social and economic well-being of the community” (Section

153) and to “Provide a safe and healthy environment” (Section 152), both of which are

fundamental to the economic growth, resilience and competitiveness of the Theewaterskloof

region. Legislative compliance and economic growth, however, are necessary but insufficient

conditions for Theewaterskloof. A green economy must also realise new growth opportunities

and create employment. It is proposed that a green economy is the only economy that has any

chance of doing this in a world of increasing biophysical constraints, and as Dow and Downing

(2006) point out, the process of developing a green economy could also provide the catalyst to

more socially sustainable communities. For this to be the case stakeholders from a wide variety

of backgrounds and disciplines need to understand why this is the case:

Ensure better socio-economic returns on the natural resources: South Africa, and

Theewaterskloof in particular, has comparative advantage in natural resources. The

municipality has fertile soil, a relative abundance of water, high levels of solar

irradiation, a reliable wind energy resource and attractive and bio-diverse landscapes.

Converting these natural resources into sustained revenue and employment, is a matter

of economic planning. However centralised energy supply, historical water allocations

and an agricultural sector that continues to adjust from statutory single channel

marketing as well as large centralised State Owned Companies wielding either

monopoly or monopsony power over key sectors under the protection of import price

parity legislation, collectively contribute to considerable scope for improvement. A

green economy will introduce more appropriate and more efficient utilisation of the

available natural resources in Theewaterskloof, and in so doing will contribute to

growth and development.

Contribute to poverty alleviation: In many respects South Africans still regard the

environment as a “luxury good” (Martinez-Alier, 1995) to be conserved when, and only

when, other social and economic needs have been met. As a result many of the country‟s

poorest people, who depend on direct water abstraction, wild harvesting of fuel and

food and fodder, subsistence agriculture and soil fertility are trapped in a cycle of

ecological degradation and poverty precipitated by the very development process that

was intended to assist them. A Theewaterskloof development approach that

acknowledges the links between the natural environment and the livelihood options of

the poor, is better placed to deliver sustainable development and much needed against

the backdrop of South Africa‟s stumbling poverty alleviation efforts.

54

Retain and develop competitive advantage: Amidst growing pressure on global and

local natural resources and increasing costs of pollution and environmental disasters,

reducing the material throughput of the Theewaterskloof economy is not only a

prerequisite for survival but central to retaining competitive advantage in the short term

and developing new competitiveness in the medium term. Innovation and a closer

alignment between Theewaterskloof‟s ecological resources and its socio-economic

aspirations is central to the retention of export markets and competitive advantage.

Structural reform for job creation: UNEP claim, “The [economic] benefits of a transition

to a green economy could be particularly significant where existing policy distortions

are large (UNEP 2010). This is particularly relevant for South Africa. Ensuring that South

Africa‟s economic growth is more labour intensive is a necessary component of the

much vaunted “structural reform” of the macro-economy (DEDAT, 2010). Certainly the

country cannot afford the jobless growth, credit driven consumption without growth in

production and growing inequality that characterised the 2005-2007 growth period. In

Theewaterskloof, which has experienced endogenous population growth and rapid in-

migration, the structural need is for a competitive agricultural sector, economic

diversification that targets more labour augmenting activities labour and the localisation

of centralised and capital intensive sectors such as energy generation and transport. Both

the green economy and the decentralisation of large, poorly functioning utilities have

been associated with increased employment prospects (WC DEA, 2007, Patel, 201026). As

the Ren21 Report (2010) observes, “One of the forces propelling renewable energy

development is the potential to create new industries and generate millions of new

jobs.” Globally renewable energy makes up just 4 per cent of the energy mix, but

employs more people than the fossil fuel industry (UNEP, 2009). The growing need for

skilled and unskilled employees in water management, climate change information,

agriculture, insurance, natural resource management and health care, offers

employment opportunities for economies committed to the green economy (Oxfam,

2010).

Cost management: The Municipal Finance Management Act (MFMA) requires

municipalities to be cost-aware. Attention to environmental impact and exposure is one

means of creating this awareness. The need to manage environment impacts forces the

Municipal and companies to look at its processes. Having employees examine the

efficiency of their actions can itself lead to cost savings (Porter & van der Linde, 1995)27.

26

Ebrahim Patel is Minister of Economic Development. At the Green Economy Summit he estimated that South Africa could create 400,000 jobs in the green economy.

27 In the 1995 article, Porter and van der Linde argued that “properly designed environmental standards can trigger

innovation that may partially or more than fully offset the costs of complying with them.” The authors show that

55

The same awareness can bring new insights into the origin and nature of environmental

costs. A portion of the costs incurred by municipalities are “external” to formal markets

– the transacting parties do not pay for the costs. Purchasing a kilowatt hour (kWh) of

electricity from Eskom, for example, requires the consumer to pay between R0.15 and

R1.10 depending on who they are. The process of generating that electricity from coal

imposes “external” costs of a further R0.55 per kWh in the form of acid mine drainage,

biodiversity losses, health impacts and greenhouse gas emissions and R0.93 per kWh if

the true cost of water used in electricity generation is imputed (Edkins et al., 2010).

External costs are real costs. Somebody pays them, and very often it is local authorities,

and their tax payers, who end up footing the bill via their poverty support programmes,

maintenance and operational budgets and conditional grants. Costs conscious

municipalities will find ways to reduce their externality costs. The green economy,

which expressly seeks to internalise and reduce external costs, provides a platform on

which to do this.

Avoiding disasters and poverty traps: Unprecedented floods, droughts, cyclones and

snowstorms around the world have defined the start of 2011. South Africa did not

escape the impact of flooding. While two months don‟t signal a trend, insurance and re-

insurance company payouts do reveal a trend driven by more than rising asset value

and people insured – economic losses from climate related disasters alone increased

from US$ 5 billion in 1970 to US$ 27 billion in 2010 (SwissRe 2011)28. Munich Re‟s 35

year record of extreme weather shows that the number of floods has tripled between

1980 and 2010, and the number of extreme event windstorms has doubled over the same

period (Munich Re, 2010). More intense and frequent weather related disasters are a

feature of a warmer climate and while Theewaterskloof cannot, on its own, control the

origin of warmer climates it does control the local zoning, built environment and land-

use decisions that determine the impact natural disasters.

New growth sectors: The global green economy is valued at US$5 trillion (IPAP2, 2010).

Investment in the green economy grew between 2005 and 2010. In 2009, US$162 billion

was invested globally in renewable energy (SEFI, 2010), and although investment in

renewable energy fell in 2009 relative to 2008 due to the recession, the value of

investments in new renewable energy exceeded investment in fossil fuel energy. In

tougher environmental standards can enhance competitiveness by pushing companies to use resources more productively and encourage managers to recognize environmental improvement as an economic and competitive opportunity, not as an annoying cost or an inevitable threat. 28

SwissRe (2011) Weathering Climate Change.

http://www.swissre.com/rethinking/climate/Weathering_climate_change.html

56

addition increasing amounts of donor funding, research funding and corporate social

investment is being directed towards the green economy.

Figure 7: Bloomberg New Energy Finance (2010)

South Africa does not yet compete effectively for this investment, but Theewaterskloof

could distinguish itself with policies and resources that identify the municipality as a

pioneer within the country, and a test-case for investors looking to expand nationally

and within the sub-continent.29

The reasons for pursuing a green economy are in many ways a prerequisite for economic

survival in the context of climate change, urbanisation, increased material flows, growing

environmental degradation and water shortages. Disregard for the environment is already

imposing dramatic and subtle economic costs within Theewaterskloof. The evidence suggests

that planned and pre-emptive responses to environmental change are less disruptive or costly

than reactive approaches (Stern, 2007; Eberhard, 2008), and avoiding crises should be a goal in

29

Significantly the Western Cape Provincial Government has the same aim of differentiating itself from the

national position on renewable energy. The Western Cape Department’s of Economic Affairs has launched a

“Greencape” initiative based on its Greentech Report 2010. http://www.green-cape.co.za/

57

itself.30 The need for change, whether knee-jerk or planned, will reconfigure competitive

advantage and define a new set of corporate, sectoral and regional winners and losers.

Municipalities that find themselves anticipating and planning for change are likely to gain

advantages in the process. The 2030 planning exercise provides Theewaterskloof with the

unusual but strategic opportunity for precisely the type of planning that is required.

30

In the Murray-Darling Basin in Australia, for example, a history of profligate water utilisation and a lengthy

drought combined to usher in radical water reform in 2006. In Northern Italy, 2007, a localised water crisis led to

the declaration of a State of Emergency. In South Africa 2005, energy supply shortages led to mandatory load-

shedding.

58

APPENDIX B: INNOVATORS AND PIONEERS IN

THEEWATERSKLOOF GREEN ECONOMY

Among the established innovators and innovation programmes in Theewaterskloof are:

SAB Malting: SAB Maltings, part of the successful SAB Miller company is located in

Caledon, strategically close to the region‟s grainlands (“where great beer begins”) and

with rail access to the country‟s breweries. The operation employs 94 people but has

struggled to attract and retain skilled professional in the town.

The Caledon plant is the largest malting plant in SAB Miller and in spite of being the

third most energy efficient malting plant in the company still requires a massive 6 MW

of energy for its operation. In the past the operation has purchased steam from EB

Steam, a company that supplied many of South Africa‟s industrial operations with on-

site steam produced using Eskom energy for which it paid extraordinary low prices (as

little as R0.11/ kWh in 2009). The arrangement between EB Steam and Eskom is being

scrutinised and curtailed as a result of Eskom‟s funding difficulties, and has forced SAB

Maltings to purchases electricity directly from Eskom. The change has forced the plant

to explore co-generation option using some of its by-products. The plant has managed to

reduce its power consumption by 10 per cent from its 2007 base in line with Eskom‟s

load-shedding avoidance agreement with industrial users – Power Conservation

Programme (PCP).

The plant is water-intensive and receives water directly from Theewaterskloof Dam.

Algal blooms on the dam required SAB to pay for a water treatment plant outside

Caledon. The company also pays for the clearing of alien vegetation from local

watercourses as part of its water stewardship programme (“Water Neutral”) with WWF

and the University of Free State. Local growers supply barley under contract farming

arrangements and partner in the water stewardship programme. Warmer and drier

climates in Theewaterskloof already affect the protein content, that is critical for malting,

in barley grown in the region. In collaboration with the University of Stellenbosch and

SABBI the company is looking to breed hardier better yielding barley varieties better

suited to the changing climate. Failure on this front will see greater proportions of barley

imported from Canada, Argentina and Australia – all of which already provide some

barley to the Theewaterskloof plant.

The plant‟s expansion is currently constrained by the low volume of rail freight it is able

to move from the plant to breweries.

SAB are reviewing the idea of a “beer festival” in the region focussing on “Food and

beverage, history and culture, local produce, adrenaline adventure”.

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Colors: The fruit exporter Colors emerged in the wake of agricultural market

deregulation. The company does not have the scale or financial security of some of the

multinational fruit exporters with a presence in Theewaterskloof (Capespan, Delmonte)

but is one of the sector‟s undeniable innovators. To a certain extent, innovation has been

driven by increasingly exacting market requirements, most notably in Europe. In 2007

Colors engaged the Carbon Trust (in the United Kingdom) to establish its “carbon

footprint” and has since been tackling the greenhouse gas emissions associated with its

supply chain – including the 300 farms from which it sources fruit. As a result of the

study Colors know that the pumping of water is its greatest source of emissions,

followed by staff housing and packaging. An ongoing experiment using biochar from

tree prunings as a soil conditioner is one way the company hopes to reduce its

emissions.

In 2011 CSIR will conduct a water footprint survey of the Colors value chain, and the

company is a member of the Cape Winelands Biosphere. Continual measurement and

innovation is a feature of Colors‟ corporate culture and has allowed it to make

significant gains towards “precision farming” while enhancing the company‟s

competitiveness. As an innovator and knowledge generator, Colors is well placed to

contribute to Theewaterskloof‟s evolving green economy.

Municipal infrastructure roll-out: The Municipality understands the role of

infrastructure in economic development, and is planning a number of catalytic

infrastructure projects in the region.

i. Tarring the existing dirt road from The Hemel and Aarde Valley to Caledon is

intended to provide a tourist link between Caledon and the popular town of

Hermanus and Hemel and Aarde wine route.

ii. The municipality is supporting the application of at least four wind farms in the

region, and sees this as a source of rates (R2,700 in rates and leases per turbine

per month).

iii. A “green business park” is planned at Donderboskop, Botriver with the intention

to use human waste for energy cogeneration, recycle grey water, install solar

passive buildings and on-site renewable electricity.

iv. The municipality is supporting the better use of existing infrastructure and

particularly the sewerage works at Kromco as a source of energy although the

financial viability of this plant appears to be marginal. Whilst not a municipal

competency, the municipality is involved in discussions to make better use of the

existing rail network and to reduce the number of freight trucks using Sir

Lowry‟s Pass. The SAB Maltings plant and fruit exporters use the rail service

60

from Theewaterskloof to Cape Town, but arranging the return service to rail-

freight cement, glass, furniture, construction materials and even tourists from the

port to a regional depot in Theewaterskloof would reduce the burden on the N2

road, and particularly the volume of trucks on Sir Lowry‟s Pass. A cement, glass

or furniture depot in Theewaterskloof would permit bulk rail freight from Cape

Town and reduce truck freight on the N2.

v. In conjunction with DBSA and the GSDI, the municipality intends installing 8,000

solarwater heater units on low-cost houses by the end of 2011 in all of

Theewaterskloof‟s towns.

The Municipality is responsible for Theewaterskloof‟s four solid waste sites and

currently transports excess” waste Overstrand. Ensuring that landfills are legal and

licensed is a problem for all of South Africa‟s municipalities.

Grabouw Sustainable Development Initiative: The Grabouw Sustainable Development

Initiative (sponsored by DBSA) has prioritised a number of “Special Projects”:

i. Redevelopment of the Grabouw business precinct,

ii. Development of a community development precinct,

iii. Land development for middle-income housing,

iv. Relocation of “project 3578” on alternative land

v. Tourism and property development adjacent to Grabouw Country Club

The pilot projects form part of the Grabouw Sustainable Development Initiative‟s

broader remit around “social justice” and “one planet living”. The intention is that

projects that are successfully piloted in Grabouw will be extended to the rest of the

municipality.

Worldwide Fund for Nature (WWF): WWF, a respected international NGO, has

oversight over a number of locally driven programmes in Theewaterskloof.

i. The Koggelberg Biosphere reserve has been established with the University of

Stellenbosch and contains 77 endemic species.

ii. The Green Mountain Eco-route is a locally developed tourism initiative to

“promote responsible eco-friendly tourism in harmony with nature” in

partnership with the Biodiversity and Wine Initiative (BWI), which is supported

by WWF. The Green Mountain Eco-route established the first biodiversity and

wine trail. The BWI encourage farmers to retain and restore natural habitats on

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their farms and to adopt sustainable farming practices. Theewaterskloof farms

contribute many of the 167 members.

iii. WWF is interested in incorporating sections of the highly compromised Palmiet

River in its water neutral programme.

Caledon Spa and Casino: The casino is part of the larger Tsogo Sun group of companies

and receives roughly 300,000 visitors annually. The casino is a feature of the Caledon

economy and currently awaits a Record of Decision on a planned golf course and

housing estate. The proposed estate entails 336 free-hold plots and 189 lodges that

would be used for a mixture of time-share and holiday rentals. Water is an obvious

constraint on the building of a golf course (Caledon already has a municipal golf course)

and accordingly the project would include a public-private partnership that would see

the casino upgrading the municipal waste water treatment plant and transporting the

improved water 9 kilometres to the golf course – a project that will cost Tsogo Sun R18

million but generate 2.8 Ml of water a year of which the golf course will require 2 Ml.

The infrastructure would belong to the municipality.

In keeping with Tsogo Sun‟s attempts to manage its energy consumption, the casino

itself is being refitted with heat pumps and LED lighting. The houses built on the golf

estate will be required to comply with stipulations on “form, colour, size and materials”

and will be fitted with solar water heaters. The development does require the Tsogo Sun

to invest in a new sub-station so as to access sufficient electricity from the grid. An

associated phase of the development will see the construction of a petrol station and

retail hub next to the N2 outside Caledon.

Fynbos farming: The Theewaterskloof mountains are famous for the diversity of the

fynbos species. High levels of endemicity within these species saw the region identified

as one of the world‟s five first biodiversity “hotspots”. Fynbos farming at Tesslersdal,

Villiersdorp and in Grabouw (Oak Valley) represents a growing export industry.

Techniques for fynbos cultivation are being researched by the University of Stellenbosch

which is collaborating with Theewaterskloof growers.

Large scale wind energy: Theewaterskloof is being targeted by aspirant wind farmers31,

all of them currently waiting for Power Purchase Agreements from Eskom‟s single

buyer office before constructing capital. Land for wind farm development has been

purchased and leased and further options on land rentals exist.

The region east of Botriver represents a focal point due to the energy of the wind

resource in that region of Theewaterskloof, proximity to the national energy grid, the

31

Shears, Botha Schabort, Biotherm and Genesyswind are all active in the region.

62

ability of the grid in that region to assimilate the supply of 500 MW of power without an

upgrade (the grid has 1,200 MVA capacity) and the pump-storage facility on the nearby

Palmiet River which allows for energy storage and facilitates the smooth supply of

electricity from a variable wind resource.

Genesyswind represents the largest of the four proposed wind farms. Their initial plan

is for 51 MW to be generated by seventeen 90 metre high Vestas turbines. The turbines

would be imported but the operation would draw on a range of local expertise and

materials. Phase 2 of Genesyswind‟s plans involve 99 MW and phase 3 involves 150

MW. Genesyswind is hoping to be offered a power purchase agreement from Eskom at

the initial Renewable Energy Feed in Tariff (REFIT) price of R1.25 in the third quarter of

2011. The combined capital investment envisaged by Genesyswind amounts to R928

million in capital. There are, crucially, no guarantees from Eskom on the awarding of

off-take contacts and Genesyswind does not yet have a Record of Decision from the

District on its planned development. If Genesyswind does not secure this off-take

agreement it will seek to sell electricity to local industrial users or through wheeling

agreements to southern Africa‟s mines.

Appletiser: Appletiser is owned by SAB Miller and located just outside Grabouw. The

fruit juice processing and bottling plant employs 230 people and product is supplied to

the local and export market. All employees have been trained to NQF level 3. The

company has recorded its CO2 emissions from gate-to-gate (i.e. excluding fruit

production and freight) and explored on-site cogeneration as an energy source.

Currently energy for processing and refrigeration is sourced directly from Eskom (50 per

cent) and from EB Steam (50 per cent) and cogeneration is considered financially

unviable due the inability (and cost) of sourcing sufficient biomass. Innovation at

Appletiser is being driven by market requirements.

Appletiser has estimated that it requires 4 litres of water to process a litre of product,

and sources its water directly from the Groenland scheme.

The company is focussed on waste management and has explored using its waste as a

stock feed, for brick making and as an energy feedstock. Waste water is passed through

an artificially constructed “wetland” to purify it before it is returned to the Palmiet

River. The wetland is, by their own admission, an ongoing experiment.

Product is transported by road, although the company would love to have the option of

rail-freight.

Appletiser has a long association with Stellenbosch University that has assisted it with

water and CO2 calculations and with waste management and personnel training.

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Melsetter Group: The Melsetter Group oversees a range of farming and agri-processing

companies in Theewaterskloof. BEE compliance and the environment are too “pressing

concerns” for the companies. Production is geared towards export and the supply of

Woolworths within South Africa. Market requirements, driven by the major retailers,

has seen the fruit production component of the business establish an environmental

fund and undertake alien clearing, carbon measuring and water efficiency measures. In

calculating its carbon footprint Melsetter makes use of a generic industry carbon

calculator developed for growers by the Deciduous Fruit Producers Trust. The

Melsetter farms have, of their own volition, begun a soil carbon replenishment process

with the University of Stellenbosch, and for the past 15 years has recycled all waste

emerging from the farm. After importing technology from France the trust‟s packshed

now recycles water in a closed loop reducing effluent into the Eikenhof Dam (and

Palmiet River). The trust has considered local energy cogeneration using chicken

manure.

Electricall: Electricall is the electrician company run by Gert Koegelenberg who recently

relocated to Theewaterskloof. The company has specialised in the installation of small-

scale (household) demand side management and renewable energy technologies

including solar pumps for boreholes (R8,500 for a pump that can deliver 400 litres per

minute from 70 metres depth), 300 watt wind turbines from China (R1,500-R6,000),

solarwater heaters and photovoltaic panels as combination units to households (having

a SWH reduces the quantum of energy required from the PV panels), and has installed a

combined biodigester to energy and photovoltaic system at the Caledon Grace hotel.

Crucially for Theewaterskloof, Electricall is able to install a two-way electricity metre, a

two day battery storage facility and an inverter (imported from Germany) that allows a

household to supply energy back into the grid. The same system could be used to net-

metre the electricity purchased and supplied from the entire municipality, creating the

potential industrial co-generators to supply directly to Theewaterskloof and the

potential for a Theewaterskloof mini-grid once legislation permits this.

Theewaterskloof Community Trust: The ambitions of the Theewaterskloof wind

farmers, and their need to compete for a share of Eskom‟s renewable energy

procurement by demonstrating (among other things) a commitment to black economic

empowerment has seen the registration of the Theewaterskloof Community Trust. The

trust has a 20 per cent stake in the project proposed by Genesyswind that is, in principle,

to be secured with a DBSA loan of R 89 million to the operation. The loan is supported

by an Export Credit Guarantee from the South African Government. At REFIT prices the

loan would be paid off after four years after which the trust would receive a portion of

revenue. Should the REFIT-based contracts not be secured, the trust will carry debt risk,

but assuming REFIT prices are maintained (and there are no guarantees on this either)

the arrangement has the potential to generate R600 million for the trust over 15years.

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The intention is that the trust funds will be used to pay for “social projects” (health care

facilities, education and infrastructure) in Theewaterskloof‟s IDP and screened by DBSA.

Management of the trust represents a large and onerous task, but the idea of a central

conduit for corporate social spending in a nascent industry represents an innovation in

itself.

Farmworker equity share schemes: Theewaterskloof is home to some of the country‟s

first joint ventures involving capital intensive commercial fruit and wine farms and farm

labourers (Vuki/ Whitehall, Thandi, Geelbeksvlei). The ventures have occupied a

controversial space in the national land reform effort with the Department of Rural

Development vacillating in its support for the concept. Vuki (which continues to

struggle financially) and Thandi, however, are good examples of the learning and

capacity building that is generated simply taking on these ambitious projects; learning

that has emanated from Theewaterskloof but been applied throughout the country.

Elgin Learning Foundation: The Elgin Learning Foundation (ELF), based in Grabouw,

has been in operation for fifteen years and is seeking to become a centre for training in

sustainable technologies relating to construction, plumbing, piping and later electricity,

with the understanding that these skills will become strategic as the green economy

develops. ELF‟s programme, which has support from DBSA and industry, is run

through a private FET College that is building its own campus using the skills, materials

and technologies that it is promoting.

Linked to the programme is a “show village” aimed at demonstrating technologies,

material and skills. If Theewaterskloof pursues the type of built environment envisaged

in this document these skills will be crucial in the short term, and exportable in the

medium term.

ELF currently coordinates a student exchange programme that sees Dutch students

volunteer their research and assistance within the municipality.

Grabouw Sustainability Initiative: The DBSA initiative is one of five national pilots

sponsored by DBSA. Some of the projects identified by the initiative include the

Eikenhof Dam development, a mixed-use housing development and a “Community

Precinct” in the town of Grabouw. The initiative highlights the importance of an

enabling spatial framework for social integration and for sustainability and has

emphasised the importance of people centred processes. As a pilot it is essential that

lesson are drawn and disseminated from the initiatives ambitious projects. At the same

time the Grabouw Partnership represents one of the important institutional assets with

which to advance a green economy.

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APPENDIX C: CARBON TAX

Three options are outlined in the discussion paper for South Africa‟s carbon tax:

i. Direct tax on measured GHG emissions;

ii. Upstream tax on fuel inputs such as coal, natural gas and crude oil; and

iii. Downstream tax on fuel products such as electricity and petroleum products.

Considerations discussed in the paper include that the level of tax should be phased in but

equivalent, over time, to the damage costs of carbon dioxide emissions. Distributional concerns

would have to be dealt with in a transparent and targeted manner (e.g. targeted provision of

free basic electricity and improved subsidised public passenger transport), but the tax should

aim to cover all sectors. Relief measures to deal with competiveness concerns, if any, should be

limited and of a temporary nature.

APPENDIX D: LIST OF CONSULTED PEOPLE AND COMPANIES

AND PRESENTATIONS PERSON ORGANISATION/

COMPANY

CONTACT

Alastair Moodie Melsetter Group moodiea@melsetter.co.za , M: +27 (83) 675

4107, Phone: +27 (21) 859 2610 ext 205

Alison Green & Barry

Gould

Barry Gould Architect and

Green Mountain Eco Route,

T: 021 8489788

Annelie Rossouw GSDI annelie.r@mweb.co.za

Ben Schoeman DBSA BenS@dbsa.org

Brenda Martin Project 90*2030 brenda@90x2030.org.za

David Farrel

Eddie Vienings

Colors (Pty) LTD david@colorsfruit.com; M: +27 083 653 3618

eddie@colorsfruit.com

Dion Wilmans Genesyswind wilmans@genesyswind.com ; M: +2782 321

4191

66

Dr Paul Cluver Capespan/ Paul Cluver

Wines/ University of

Stellenbosch

drcluver@cluver.com

Francois Rozon;

Kobus Prins; Brendan

Jales

Appletiser FrancoisR@appletiser.net; M: + 27 836329922

Gert Koggelenberg Electricall gert@electricall.co.za; M: 082 498 5592

Inga Kotze WWF (Newlands) ikotze@wwf.org.za

Jan Visagie

Conrad van Heerden

TWK Municipality JanVi@twk.org.za

conradvh@twk.org.za

John Stenslunde

Tony Cole

SAB Maltings T: 028 214 3213

Prof. Mark Swilling Sustainability Institute,

Stellenbosch University

Mark.Swilling@spl.sun.ac.za

Mark Tanton SA Wind Energy

Association

mark@red-cap.co.za

Peter Dall Farmer, consultant gpdall@global.com

Prof Nic Segal

Juanique Pretorius

Independent Consultant,

Emeritus Prof. Graduate

School of Business.

nsegal@xsinet.co.za

juanique@epafrica.com

Rudi Coetzee Operations Manager.

Caledon Spa and Casino,

Tsogo Sun

rudic@tsogosun.com; M: + 27 82 781 3967

PLATFORMS AT WHICH TWK GREEN ECONOMY PRESENTED/ REFERENCED

Greencape MEC Alan Winde‟s

reference Group

Francois DuPlessis

Ferabrah@pgwc.gov.za

GSDI Annelie Rossouw annelie.r@mweb.co.za

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LOCS – Local Climate

Solutions for Africa

2011

Lizanda Du Preez;

Lucinda Fairhurst

lizanda.du.preez@iclei.org;

lucinda.fairhurst@iclei.org

UN Habitat Green

Economy

Andrew Rudd Andrew.Rudd@unhabitat.org