Should DTI local content directives be more important than saving energy, improving lives and job creation?

James Green, SESSA Solar Water Heating Chair

As often is the case when government comes out with rules that have not involved extensive consultation with the business sector it is going to affect, the results have been detrimental. The new Visa rules intended to mitigate child trafficking are a case in point, where the airline and tourism sector warned and fought to avoid implementation, but enforcement has already seen a 38% reduction in tourist numbers from China, and India close behind. At a time when the country is in rapid decline in many sectors, helping kill off the tourism industry is severely shooting oneself in the foot and for what real reason?

Rooftop PV

In the solar water heating industry, National Treasury implemented rules over 2 years ago (June 2013) on recommendation of the DTI, for government procured solar water heaters that directly or indirectly resulted in the collapse of the solar water heating industry into low income homes. 

The worthy objective of local content manufacture for government procured solar water heaters under the PPPFA sector designation was simple enough in that 70% local content on value had to be achieved. All the South African manufacturers with SABS Marks of low pressure solar water heaters achieved and exceeded the figure at the end of 2012, and tens of thousands of such systems were installed.   

But the DTI rather than using a proven description of a solar water heater under SANS 10106, decided to ignore it, and complicate the issue and interpretation by specifying 2 components for local content, being the tank and the collector at 70% each. To add to the complexity on the calculation various exemptions on primary materials such as steel were then given.  

A simple objective became extraordinarily complex in interpretation, and despite the DTI being advised at the time and on numerous occasions thereafter, they have persisted. The result being between 4,500 and 6,000 jobs lost in installation of SWH along with the manufacturers that had set up in South Africa to make solar systems also being mothballed. 

The specific area of contention, which resulted in Eskom being unable to implement the continued roll out of NSWHP into low income homes was the solar collector. In the 300,000 odd systems installed in SA between 2010 and 2012, they all used evacuated glass tubes (EVT’s) for the collector. The vast majority of EVT’s are manufactured in China, and need to be imported as South Africa has no manufacturing capability, and as an aside requires a 100% reliable electricity supply.

Under the current interpretation of the PPPFA rules, although the glass tubes only represent about 25% of the total value, and are part of an integrated unit, (the tubes cannot work without the tank and vice versa) all the previously approved solar systems are disqualified, and will not qualify going forward. 

In light of BRICS and trade agreements, it would appear to be a questionable policy to kill off any opportunity for the Chinese to compete with their components (i.e. EVT’s) for the intended roll out of 600,000 units, let alone the bigger picture as announced by the President (September 10th 2015) of a further 1,4m units in the next 4 years. 

As has been well publicized the South African steel industry is in crisis.  Yet the PPPFA rules provide exemption to various metal components, for example imported metal materials used in the making of the solar tank and frame. How can it be logical to exempt materials, which can be made here, but to exclude glass tubes that can’t?  

The DTI reaction is use a flat plate collector in preference to an evacuated tube. As flat plate collectors are made out of metal materials, exemptions will again apply, despite assembly resulting in the creation of a few jobs in manufacture, but this is not going to support local industry in materials.

Despite all the technical argument, the bigger question is will a solar water heater fitted with a flat plate collector in preference to a Chinese made evacuated tube do the job of generating sufficient hot water for an RDP home, and what will be cost. Arguably it can, (no argument as to which is better or worse), but the cost with a flat plate collector with the same performance as evacuated tubes will be considerably more expensive.

As the purpose of the socio economic uplift program is to provide hot water for low income homes, and saving electricity in heating water using hot plates and kettles, as well as job creation in installation, surely it makes sense to use technology that does the job at a more competitive cost? Add into the technical equation that flat plate collectors used in freeze areas are considerably more expensive than EVT’s, require more maintenance, and it becomes self explanatory why in China and India, low income homes are fitted with EVT’s rather than flat plates.  

Regrettably the solar water heating industry has collapsed, and not one LPSWH has been installed into low income homes for nearly 3 years. A worthy holistic program lies in tatters. 

Going forward if a SWH roll out to low income homes is ever to be re-implemented, as has been indicated to parliament by DOE it will be, and also by the President, it must be time for the private sector to work with government to implement rules that are sound and well thought out. The alternative is potentially another expensive mistake, similar to what is being experienced in the tourism industry.