Media Room

Energy News

Community Trusts's success rest on sound management, sustainability

At the recent Renewable Energy Forum, the IDC's socio-economic development specialist, Tendani Nelwamondo, said Community Trusts needed sound management and minimal political interference to successfully benefit rural communities.

The success of Community Trusts rests on sound management, which will ensure rural communities benefit from renewable energy projects funded by the Industrial Development Corporation (IDC).

Leading a discussion on economic development and community management in renewable energy projects in South Africa at the Renewable Energy Forum, from 4 to 5 March in Sandton, Tendani Nelwamondo, a senior socio-economic development specialist at the IDC, said the corporation is involved in 23 renewable energy projects around the country.

Five projects – mostly wind energy – are in the Eastern Cape, three in the Western Cape, and one in the North West. The rest are found in the Northern Cape, mostly in Upington. Nelwamondo said all renewable energy projects supported by the IDC are in initial stages.

“In these renewable energy projects, communities own a stake and benefits accrue to them during the life cycle of the project,” he said, adding that the IDC is committed to achieving the same objectives as government to create jobs, drive economic development and transform disadvantaged rural communities.

Community ownership, from an IDC point of view, is where communities own shares in the company or hold equity stake, according to Nelwamondo. “Communities are afforded the opportunity to buy equity stake and that equity is financed through loans from government departments like the Department of Rural Development,” he said.

The establishment of Community Trusts by successful bidders is a requirement of the Department of Energy’s (DoE) Renewable Energy Independent Power Producers Procurement Programme (REIPPP), which stipulates that trusts be set up in all areas of operations by all bidders. The department requires renewable energy project developers to invest in communities living within a 50 kilometre radius of each project to stimulate local economic development.

Nelwamondo said sometimes the 50 kilometre radius is not feasible. Giving an example of the two concentrated solar projects funded by the IDC in the Northern Cape, Khi Solar One and KaXu Solar One, Nelwamondo said the area around the two projects is sparsely populated.

"The approach that we shared with the DoE is that we need to identify communities that are in close proximity to the projects before looking at the overall 50 kilometre radius. Each bidding company has to conduct an analysis of the socio-economic needs of communities within a 10 kilometre radius, and if no sufficient communities are found, expand to 20 kilometres until they reach the 50 kilometre radius."

In identifying communities around the two Northern Cape projects in need of funding, the IDC decided to expand the 50 kilometre radius. Nelwamondo said, “With the 20% stake that communities are going to own in these two projects, we calculated the value and realised that the value far exceeds the communities’ needs living within the 50 kilometre radius. That is when we decided to expand the 50 kilometre radius,” he said.

Nelwamondo said the IDC has a policy that deals with community investment. The policy states that 85% of benefits from the projects must accrue to black communities, a stipulation which is in line with what the Department of Trade and Industry wants, he said.

For Community Trusts to be successful, Nelwamondo said they need to be free of political interference, which is why the IDC recommends that councillors be excluded for appointment in the board of trustees. “Otherwise the project will be steeped in political problems that will hinder progress,” he said.

Training and educating members in a Community Trust is essential, said Nelwamondo. He said basic training should include education in corporate governance, financial management, investment planning, community development and basic business principles.

“Training and education is key to the success of any trust. If the community starts to own shares in a company, it is critical that we invest some of the money into training and education. We need to provide a lot of capacity building.”

In addition, the success of a Community Trust hinges on the development of a sound community development plan. The plan outlines community development projects after receipt of dividends from the project.

Communities can decide to invest in development projects which include education, health, agriculture, sports, arts and infrastructure. These projects have to be guided by the socio-economic needs of the community, according to Nelwamondo.

"What we encourage as the IDC is that the dividends should not be given to individual households, but they should benefit indirectly. If for example, there is a need of building a school then the trust can facilitate the building of the school in the community. We don’t encourage giving out cash because this creates a dependency syndrome within the community."

But there are challenges; the IDC’s current renewable energy projects are funded through loans and communities realising benefits becomes a problem. Because of this, communities don’t realise benefits immediately, according to Nelwamondo.

“From the IDC’s point of view, we should allow a trickle dividend to be afforded communities. We say instead of taking the entire dividend to repay the loan, we will allow a certain percentage to go to Community Trusts and the other percentage will cover the repayment of the loan,” he said.

He added that there is still much to be done to improve the setting up and functioning of Community Trusts, and this involves more consultations with government and key stakeholders like project developers. Without commitment from all parties, poor communities are the ones to lose out.

"Sustainable community development is a key priority for uplifting or improving the socio-economic level of underprivileged communities. And that’s what the IDC wants to achieve," said Nelwamondo.

Our sectors

Our strategic business units work in three distinct areas: the services sector; within the mining and manufacturing sector; and in the agro-processing and new industries environment. MORE >

Our regional support

We make an impact across the country, helping develop new business, growing existing companies, boosting local economies and providing expertise wherever needed. MORE >

Annual report

Advancing Industrial Development covers our financial and non-financial strategy and performance aspects for 2015. MORE >

Our products

We offer a wide range of products from debt equity to providing working capital and equipment finance. MORE >

Our research

Stay informed and read our award-winning research reports, as our team keep tabs on the economic trends globally, regionally and locally. MORE >

Corporate responsibility

We are playing our part in improving the quality of life of all our communities, especially in rural and underdeveloped areas. MORE >

Doing business with us

This is your one-stop-shop where you can engage with us directly via our e-services. MORE >

Domestic Medium Term Note Programme

The Industrial Development Corporation of South Africa Ltd has established a ZAR15,000,000,000 Domestic Medium Term Note Programme (as amended and updated on 17 July 2012). You can read the memorandum here. MORE >

PAIA Manual | Terms and Conditions | Employee Webmail | Contact us | Sitemap
© The IDC 2016, ALL RIGHTS NOT EXPRESSLY ALLOWED ARE RESERVED. P.O. Box 784055, Sandton, 2146, South Africa