Getting the labour component right is critical to the success of the Reipppp

Sourcing skills in underserved areas presents numerous challenges.
The key is to spend the labour budget in a way that maximises profitability while leaving a positive lasting impression on communities, says the author. Image: Dwayne Senior/Bloomberg

The South African Renewable Energy Independent Power Producer Procurement Programme (Reipppp) is envisaged as a sustainable solution to the country’s current power problem – but the process of budgeting and costing for every component from start to finish is complex, and labour is a critical element of this costing.

Getting the labour component right from the outset sets up these projects for success, and having a people partner throughout the process is hugely beneficial. 

Perhaps the biggest challenge of Reipppp projects is that all the new solar and wind farms are located in rural and traditionally underserved areas, which means there is typically a lack of skilled and semi-skilled artisans available.

Regulations state that suppliers must, however, give preference to the local community for any available role, and they need to be able to demonstrate that an attempt was made to source locally before bringing in outside skills.

Unskilled labourers must therefore come from surrounding communities, but this is made more complex by quota systems that are developed by ward counsellors and community leaders.

Often, independent power producers (IPPs) will not be able to employ more than one skilled or semi-skilled labourer per household, or two unskilled labourers.

Wage problems

Adding to the challenge is the minimum wage increase that came into effect on March 1, which will undoubtedly affect budgeting. If the project is deemed to fall under the Basic Conditions of Employment Act, there is a significant increase that needs to be factored into the budget.

These increases with regard to labour have already been gazetted, and will affect the IPP projects. The challenge now is for IPPs to budget effectively and maximise labour costs, while achieving the required overall 40% localisation, and without escalating the cost per kilowatt to generate electricity.

Read: Renewables peak at 19% of SA’s electricity supply

Sustainable communities

Aside from sourcing labour for immediate projects, there is also the sustainability angle to consider.

Projects of this nature do not come into these rural, underserved communities often, and to create sustainable upliftment in these areas is essential for economic growth. Upskilling people in fields such as entrepreneurship, basic business skills like accounting and finance, and softer skills like communication, can be hugely beneficial in the long term.

It is imperative to help these communities become more economically active and self-sustainable, uplifting whole areas rather than providing only specialised skills that will become redundant once the IPP projects are complete. Not only is this social economic development mandated by law, it is also in the best interests of the country as a whole.

People partners for success

Labour is a critical component of budgeting. The key is to spend this budget in the most efficient way possible to not only maximise profitability, but also leave a positive lasting impression on affected communities.

Partnering with the right company can help to facilitate this process from the outset, with advice on budgeting to ensure that gazetted wage increases have been accounted for, right through to the pay-over of statutory costs when they come into effect.

Your people partner can also facilitate sourcing and recruitment, training, upskilling, social development and more, and will take on the human resources roles such as payroll and onboarding.

This will not only smooth the process and help maximise budget, it will also remove a large administrative headache, enabling IPPs to focus on their core task – providing sustainable energy solutions to ease South Africa’s ongoing power problems.

Viren Sookhun is MD at Oxyon.

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Consumers, and in this case, community members, never stop to think about who actually pays for government intervention in the process of voluntary and mutually beneficial exchange between strangers.

While the shortsighted consumers and workers believe that their employer finances the minimum wage out of his profit margin, in fact, the opposite is true. Consumers finance the minimum wage, either with their diminishing spending power or through their deprivation and an absence of the services they were used to receiving.

The entrepreneur needs a minimum profit margin to compensate for the risks and to justify the employment of capital. The competitive force of the free market and the risk of bankruptcy ensure efficiency that benefits consumers. Higher profit margins lead to more competition, that in turn puts pressure on the profit margin.

When the state intervenes in this free and fair process, to enforce a minimum wage that is higher than the natural wage, the state actually enforces a minimum price on products and services for consumers. The price of products like food and electricity will be higher than the natural rate to compensate for the minimum wage, or, if the consumers cannot afford the manipulated higher price, food and electricity will become unavailable and workers will be unemployed. The consumer and the unemployed pay for government intervention either way.

Socialists never contemplate the reality that they themselves are actually paying for their shortsighted strategies, chasing after this mirage of social justice and material equality. Socialist policies enable the state to initially redistribute the spending power of the consumer and eventually redistribute the living standard of the consumer. A society consumes itself through socialism. Such a society redistributes the investments in capital infrastrucure and turns it into sewage that fills the potholes and pollutes the rivers.

The results of socialism are a self-inflicted manmade disaster. The system delivers the exact opposite of what it promises. It is a Ponzi scheme.

End of comments.

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