ROUNDTABLE CONVERSATION SERIES ECONOMIC DEVELOPMENT IN REIPPPP

Transcription

1 ROUNDTABLE CONVERSATION SERIES ECONOMIC DEVELOPMENT IN REIPPPP Supporting sound community trusts - establishment, governance and operation Roundtable Report

2 ROUNDTABLE CONVERSATION SERIES ECONOMIC DEVELOPMENT IN REIPPPP July 2016 Funded by the South African Wind Energy Association (SAWEA) Implemented through the joint SAWEA/SAPVIA Working Group on Socio-Economic Development Hosted and co-funded by SAWEA and SAPVIA members 1 Background 1 Suggested report citation: Wlokas, H. and Soal, S. (2016): Economic development in REIPPPP Supporting sound PICTURES ON FRONT PAGE: ENERGYBLOG 2 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

3 The joint SAWEA/SAPVIA Working Group on Socio- Economic Development is leading a series of Round Table Conversations regarding Economic Development under the REIPPPP. The aim is to stimulate in- depth thought and discussion about critical aspects of community practices amongst key decision makers and stakeholders involved in the design, implementation and monitoring and evaluation of community development in REIPPPP. The first Round Table Conversation on the topic Managing Community Unrest Resulting from Political Lobbying for Municipal Elections 2016 was hosted by Mainstream Renewable Power on 26 April The second roundtable Supporting Sound Community Trusts - Establishment, Governance and Operations was hosted at the Industrial Development Corporation on the 23rd May This report summarises the discussion and key outcomes from this second roundtable. The previous reports and presentations for the roundtables can be accessed on the SAWEA and SAPVIA websites. Introduction The interest in the roundtable was overwhelming, with registration for the roundtable having to be closed with 60 participants and additional RSVPs having to be declined. In preparation for the day's discussion, participants submitted pressing questions and issues in advance of the day, which were then organised into themes, of which eight emerged. These questions and themes were shared at the start of the day as feedback on what participants had brought into the roundtable and as the starting point for discussion. 3 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

4 Themes&& Trusts(in(context( Purpose(of(trusts( Cons5tu5ng(trust(structures( Cons5tu5ng(trust(work( Governance( Rela5onships(with(community( Suppor5ng(opera5ons( Monitoring(impact,(learning(lessons( REIPPPP and community trusts (Fumani Mthembi - Knowledge Pele) Fumani Mthembi is a founding member of the Pele Energy Group. She holds a masters degree in science and international development from the University of Sussex. She is also the principal investigator of the study SA and The Post 2015 Agenda, which Knowledge Pele has undertaken to understand the intersections between global development and the local CSI agenda. Her presentation reviewed the potential and limitations of community trusts to serve as development vehicles in REIPPPP. Her company's research exploring stakeholder experiences in the implementation of trusts and the findings suggest that for trusts to be mechanisms of transformation and empowerment they require more deliberation and intent in their establishment and operation. 4 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

5 Corporate social investment in South Africa averages 8 billion rand annually, with minimal record of impact. This shortcoming needs to be addressed in REIPPPP, if the ambition is to establish a better reputation than the average CSI initiative. Even more concerning is the indication that the current avenues employed to invest CSI funds, follow classic welfare and charity intention, which tend to re- enforce existing power structures in SA s society. Turning these around, requires actual power to be transferred to the beneficiaries of projects. It is a complex task and asks, next to other changes, for the relationships between stakeholders and shareholders (in REIPPPP represented by communities and trusts and IPP companies and investors), to be rebalanced. The presentation identified administrative questions that need to be explored and addressed collaboratively. These are listed in Picture 1. Going forward, in order to overcome some of these challenges, collaborative multi- stakeholder forums and learning events like this roundtable are important. A concrete example of a different approach sees the 15% administration fee granted to the operation of trusts to be transferred, in combination with required management and planning skills, to communities themselves. The presenter stressed the need for deep conversations to prevent perpetuating the detrimental effects passive black investors have on economic development, or misjudging the opportunity, provided by REIPPPP, to fundamentally transform the power and future of energy communities. 5 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

6 Findings Community Trusts And REIPPPP: Key Concerns Community Trustees Dealing with the 50km radius when it conflicts with community? Who qualifies as a trustee and what checks are conducted? How do we know that someone is truly a beneficiary? How do we ensure a correct assessment of need and fair spread of benefit? The Role of IPPs Governance How is the work shared between junior & senior sponsors? What can the trust do? What can t it do? Who will select Trustees? How much should the IPP define the trust prior to local trustee involvement? Who handles administration? What training is required for trustees? What is the appropriate level of control to maintain over the trust? How are decisions about funds disbursements made? Logo usage PICTURE 1 SLIDE FROM FUMANI MTHEMBI'S PRESENTATION AT THE COMMUNITY TRUST ROUNDTABLE IN JULY Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

7 RE promoting social development through community trusts? (Steve Collins The African Safari Foundation) Steve Collins has worked as a consultant in the rural development sector for 23 years specialising in land reform and local economic development linked to natural resources including biofuels, biodiversity, wind energy and other sustainable land uses. He is passionate about involving communities in their own development and making them the focus of NGO, private sector and government development initiatives. One of his core skills is the ability to situate large private sector and government development investments in a rural context so that they stimulate local economic and social development. Steve reflected on his learnings from community associations in Mozambique, property associations in South Africa and most recently, his work with community trusts in Kenya. His work is critically guided by the question of how to contribute towards the achievement of the Sustainable Development goals. The answers to this lies, in his view, in a solid and grounded social practice. By default, such practice differs depending on people and places. Important aspects of this practice, in relation to the establishment of community trusts, include - a vision and development plan for any process, - appropriate measurement, monitoring and evaluation efforts, to allow assessments about the progress made towards the vision. - adequate capacity and skills amongst project staff and/or trustees - principles such as transparency and ownership being adhered to and acted on. The practical implementation of these however requires the investment of time and resources, which if granted sufficiently, will not be wasted investments, but 7 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

8 fundamental to the successful operation of the trust. In some instances, the resources required to capacitate the trust, with training, office and support, are equal to the resources available for the actual community projects. Further, the trustees ideally represent various sectors, bringing together essential expertise for the governance of the entity. Such include legal, financial and corporate knowledge. Equally important is a geographical representation, extending across the beneficiary area. External advisors can support decision- making processes through providing input that is perceived to be neutral/independent. It is essential to also establish reliable feedback channels through which decisions can be communicated to the wider community. Further practical advice included: - Identify and appreciate the resources available locally, that includes skills, assets, knowledge and materials. - Remain open minded about different perspectives on issues, e.g. female genital mutilation can be seen as problem or as tradition. - Take community relations seriously, a wind farm development in Kenya was stopped by conflicts between companies and communities. - Community development, and trust investments, is not a vehicle for political parties- there is no ANC water, DA water and EFF water, water is water. - It is hard to measure the immediate impact of investments into education, but longer term this is the best investment. Steve s slide outlines his work with a community trust in Kenya. The trust was established in association with a wind farm and is constituted by a group of people belonging to the Maasais. The Maasai group, closest to the wind farm decided on the definition of beneficiaries for the trust. The result reflects social structures and the geographical location of people. 8 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

9 CASE STUDY- KIPETO WIND PROJECT, KADJIADO COUNTY, KENYA 100 MW wind farm with a 25 year PPA. Being built on individually owned parcels of land within a Maasai community. Individuals will get 2.5% of the turnover of the turbines on their land. There is a community liaison committee in place. Community will receive 5% of dispersed dividends this is a voluntary self imposed tax agreed by the shareholders. A community trust will be formed to receive and disburse the funds. Defining the community took many meetings. We are looking for quick-wins linked to the construction period. Water supply linked to new boreholes Construction offices and accommodation will become teacher accommodation A budget has been set aside to social spending to bridge the gap before profits are made PICTURE 2 SLIDE FROM STEVE COLLINS S PRESENTATION AT THE ROUNDTABLE ON COMMUNITY TRUST ROUNDTABLE IN JULY 2016 History of successes and challenges of community trusts in South Africa (Tendani Nelwamondo - Industrial Development Corporation) Tendani Nelwamondo works for the Industrial Development Corporation. He is skilled in fundraising, mediation, social facilitation, land reform, community and employee ownership and identifying investment opportunities. His work includes assisting Anglo Platinum to conclude long- term surface lease agreements for the purpose of mining development in communal land in Limpopo Province. Tendani provides expertise to the IDC on community and employee ownership in line with the Broad Based Black Economic 9 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

10 Empowerment. He is also a member of the board of trustees for the Bethlehem Farmers Trust and is alternative director for the Dorper wind farm. The IDC is involved in REIPPPP as funder of community shareholding in respect of the local ownership requirement. Community trusts and property associations are common vehicles for development in the mining, retail, tourism, forestry, agriculture and land reform and most recently the renewables sector. The associated incomes for communities in REIPPP exceed the resources previously available in the forestry or agricultural sectors. Some of the existing community trusts in South Africa are very successful, while others have their challenges. Public documentation of these case studies and learnings is mostly lacking. Some successful examples are listed on the slide that follows. In REIPPPP, the DoE was expected to provide guidelines on how trusts shall be structured. To date, such are still not available. The implementing companies face numerous challenges, from the selection of trustees to the practicalities of operating trusts over the committed 20 year project lifetime. In the absence of any further guidance, and in the interest of transformation and empowerment of communities who are involved and affected, communities need to be organised. In this context, an advisory board is needed as well as an association that provides training and support to community trusts, but also advises industry on how to structure community trusts. 10 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

11 Community Trusts regarded successful Royal Bafokeng Nation Development Trust Mining implemented many projects 2004 R5,6 billion in 10 years. Sishen Iron Ore Company (SIOC) - Community Development Trust 10 Trustees 6 Board Committees Chair Independent Trustees - Beneficiaries - Gamagara Development Trust, Tsantsabane Community Trust, John Taola Gaetsewe Development Trust, Maphalane Disability Trust & Godisang Thabazimbi Community Trust Enterprise Development; Healthcare; Land & Housing; Education & Development and Welfare & Humanitarian Khayelitsha Community Trust Mall, Housing and Light Manufacturing BoT and Executive Management. Amangcolosi Community Trust Land Reform - Land Restitution KZN received 8000 ha 376 beneficiaries - created a company to manage the farms - Ithuba Agriculture employs ca 400 people. 6 PICTURE 3 SLIDE FROM TENDANI NELWAMONDO'S PRESENTATION AT THE COMMUNITY TRUST ROUNDTABLE IN JULY 2016 Experiences and lessons from an existing REIPPPP community trust (Roji Kisten - Cookhouse Windfarm Community Trust) Roji Kisten worked for Old Mutual on infrastructure projects before taking on the role of independent trustee and chairperson of the Cookhouse Windfarm 11 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

12 Community Trust. Rojie is passionate about making a meaningful impact and is involved in numerous initiatives as social activist. Rojie shared insights, reflections and lessons from the establishment and starting operations of the cookhouse wind farm community trust. The community, through a nomination process involving individuals and local organisations, selected the beneficiary trustees. The process allowed for objections, which had to be founded on solid reasoning. All trustees are Black and 40% of them are women. Over time, the trust aims to have an equal gender split amongst trustees. Trustees participated in training, which was a significant investment, and each beneficiary trustee is mentored by an independent trustee. The focus of the trust is on education. A comprehensive planning process established this focus. Decision- making is a deliberate and conscious process in the trust, each decision is well discussed and final results are generally defendable by all parties involved. Clear rules are critical for this. Monthly social dialogues, to which up to 70 community members are invited, form an important part of the trust s positive communication work, ensuring that information is effectively disseminated. The trust is developing it s own brand, a logo is currently being designed. The trust is working with a long- term vision, extending for at least 20 years. Hurdles occur, but through collaboration and communication, can be tackled and overcome. In the long- term the trust will be solely run by the beneficiary trustees. Establishing and operating sound community trusts is not an easy task, but it is possible and very rewarding when functioning structures and processes are in place. The Department of Energy is requested to continue with community trusts in coming procurement rounds. 12 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

13 Questions from roundtable participants Following the presentations and related Qs&As, participants were asked to each write down one key issue they are grappling with as industry or associated stakeholders. These were individually written down, grouped and discussed in- depth in small groups. Six themes, or areas of discussions emerged: 1. Community engagement 2. Doing it better 3. Doing it differently 4. What can trusts achieve 5. Measuring impact 6. Industry and the IPP Office One group was concerned with questions about how to engage communities effectively, with a particular focus on the design and implementation of community trusts and how to transfer ownership of development measures to the actual communities. A second group discussed the practicalities of operationalising community benefits and trusts. Questions tackled included for example trustee remuneration and refinancing of trusts. How to measure the impact of community trusts? A third group developed ideas about possible measures that might appeal to the IPP office and industry s needs. A fourth group discussed the differing views and opinions of government, the REIPPPP policy and the IPP office as well as industry about the intention and vision for community benefits. The sixth group discussed whether trusts were the best kind of vehicle for accomplishing the SED/ED requirements of the REIPPPP. They explored what the alternatives might be to establishing trusts at local/community level. 13 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

14 In detail the questions and comments per group included the following: 1. Community engagement Give an example/s of instances where community trusts are established and managed predominantly by the community and whether they have managed to successfully achieve the objectives set by the trustees. If so, how was that achieved? When do we start engaging communities and community trustees? How do we best engage them? What is the best way to mitigate community misunderstanding regarding the purpose of the community trust? What factors should be considered in the creation of a community development group (local, involvement at area of operation) and how to start looking/sourcing for individuals to constitute this body (trust/association etc.)? How do you get communities to really own their development? How do we ensure the trust beneficiaries (50 km radius) take full ownership of projects, considering that some benefit sooner, which requires companies to manage expectations. This is of particular importance if different companies target the same beneficiary radius or communities. a. Prioritising of projects in response to greatest needs and transparency around this are key. How do you facilitate community ownership when the community has no money? Blue&White collar worker employee share options in project? Has this been done before? 2. Doing it better How to practically operationalise trusts (admin, governance, implementation structure) and build capacity for trusts in the short term, such that the long- term sustainable impact objectives are achieved? The elections of the community trustees& making a trust sustainable, with community trust funding enterprise development projects. 14 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

15 How best can community structures be arranged to manage the trust projects successfully? Do trustees get remunerated for their participation or is it considered a free community service? If we remunerate community trustees, how much is appropriate? What are some of the successful mechanisms for integrating and retaining trustees from the community? How does the refinancing of trusts work, especially taking into account that the debts & loans must first be serviced before the dividends become available for community projects. Have any other trusts refinanced to bring trust income forward? How can the sector successfully navigate indebtedness of the community trusts? How do multiple community trusts operate/ collaborate in the same community? What types of projects can have the greatest catalysing effect? How do you get IPPs to have a true heart for communities beyond compliance& governance? 3. Measuring impact How are trusts going to be monitored? How do we measure impact? When? What does measurement of community development mean to the IPPs and to the IPP office? Are the outcomes aligned? Are the desired metrics aligned- long term and short term, outcomes and efficiencies, magnitude and value? 4. Industry and the IPP office What exactly in the REIPPPP framework (RFP IA s) stipulate/implies the choice by IPPs that community trusts are the most appropriate vehicle for community ownership? (And how can this be restructured/ open up to allow for something better& something different?) 15 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

16 What are the IPPs real views on community trusts? How IPPs/ED managers and the IPP office will proceed to engage each other on establishing conducive mechanisms (reporting, monitoring etc.) for meaningful SED- ED? How do we sustain these learnings outside these sessions, so we can convince the DoE to keep trusts? The IPP office has heard enough on SED- ED issues since last year. What is it doing to address concerns? What is the role of IPP office in structuring community trusts in the renewable energy sector? What role can research play in eliminating some misconceptions on community ownership for the renewables industry? How can the industry bodies (e.g. SAWEA and SAPVIA) contribute to this? Does this sector have a vision on how the community trusts can add value to the long- term development of energy communities? 5. Doing it differently Should community trusts be recognised as an ownership vehicle? Is there an alternative vehicle/method that can lead to community upliftment? Are trusts the most appropriate approaches/vehicles? Does the RE sector have higher standards regarding social development than other sectors? If so what guides these standards? 6. What can trusts achieve? What performance standards and benchmarks are available to review the work of community trusts? What are some of the guiding principles/ requirements for community trusts to provide meaningful benefit? Understanding that development is long term and capacity building is a pre- requisite: establish a fund to facilitate collective learning and training. How, who, when, how much can be/must be invested in this fund? 16 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

17 How do we shift the conversation from community development under the RE programme to broad community empowerment linking back to the national strategy for sustainable development? What is the ultimate goal of the development measures implemented by the RE industry? Can we define exit strategies to prevent dependency of communities (and community trusts) to the corporate development funding? i.e. what does long term success look like in the REIPPPP development space? Practical suggestions Subsequent to the small group discussions, practical suggestions were shared in the plenary. Suggestions addressed company practice, industry learning, government capacity and support community trusts require. Company practice It was emphasised that IPPs must invest time and effort in preparing communities, sincerely and appropriately for the responsibility and opportunity associated with the incoming development funds. It was acknowledged that this requires, in many instances, building additional internal (to the IPP) capacity to address economic development appropriately. Industry learning It was established that there is scope to leverage existing knowledge about economic development, community development and company- community relations. Thus, it was promoted that companies increasingly share lessons of innovative approaches (and there are many) with each other. This however requires a continued learning space, for the industry members and other stakeholders. Also, lessons from other industries regarding their community trusts should be taken onboard and further research into impacts of community trusts be conducted. Government capacity 17 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

18 Capacitation of local and regional government to produce functional IDPs and Spatial Development Frameworks was identified as critical. Government must specifically take note of the shortcoming in the mining industry to incentivise collaboration of companies and rectify this in the renewables industry through amending the policy in this respect. Supporting community trusts It was strongly recommended to establish a central body to coordinate and possibly oversee community trusts. Such central body, would also be able to provide training opportunities for trustees and potentially institutional structures like a future trust association. Further, the South African appropriateness of impact bonds, which are a common mechanism overseas, should be explored further. Conclusions The roundtable closed with a shared understanding that dialogue, discussing strategy and practice, is of immense value to the successful implementation of the REIPPPP s community benefit requirements. Areas for exploration and further collaboration amongst those working collaboratively, going forward, included the idea that guidelines could be formulated for the establishment and effective functioning of trusts. These should take account of three pressing needs discussed on the day. Firstly, the vision or policy for 'doing Trusts differently'- including recognising their structural and economic potential and even seeing them as vehicles for local development, rather than as vehicles for implementation of the REIPPPP requirements. In this vision, trusts could be seen as drivers of low carbon development and local economic development, as existing somewhat outside of the task of company compliance. 18 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

19 Secondly, guidelines should spell out the implications this has for company operations and for the IPP office. This has impact on operations, on resource allocation and on organisational and human capacity development to work effectively with trusts. Thirdly, compiling guidelines is also important to disseminate the how to do trusts better suggestions - drawing on all the very specific ideas and concerns shared on the day. These can be seen as 'fair play rules.' Lastly, in response to the questions raised on how to create an enabling environment for community trusts to contribute towards making important structural shits, it is essential to consider pursuing the idea of bringing trusts together into a national association in order to further strengthen capacity and potential of these bodies. Closing remarks about changes to local ownership in REIPPPP At the roundtable event, representatives of the IPP office raised concerns that the establishment of community trusts in response to the local ownership requirement might not be legally sound. It was highlighted that question are being raised around the legal ownership - who are the real owners of these community shares? Further, the IPP Office representatives suggested that government is deliberating on a possible removal of the local ownership requirement in REIPPPP. It was suggested that this change may be applied retrospectively to projects already awarded in previous rounds. There were further engagements with the IPP Office on these issues and further clarity was provided. The IPP Office indicated that in future bid windows local ownership might no longer contribute towards black shareholding. If such were to be implemented, the 2.5% minimum threshold for shareholding by local 19 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

20 communities would no longer apply. This, the office stated, would however not impact other forms of broad- based ownership schemes. In addition, the office stated that given the different spatial distribution characteristics of geographical areas, the 50km radius could be problematic for some IPPs in achieving the ED/SED commitments, and most importantly, in defining beneficiary communities for purposes of implementing ED/SED projects and establishing the community trusts. The Department therefore is considering broadening the definition of local community to district level. No final decision has been made but a pragmatic approach will be implemented most likely including 50km and/or district level. The IPP office stated that there was no intention to morph existing trusts into a single super fund or request changes to existing community trusts. 20 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust

21 For more information and questions about the Roundtable Conversation Series, please contact the chairpersons of the Working Group. Masechaba Mabilu, Acciona ED Manager, SAWEA/SAPVIA Joint SED Working Group Chair Holle Wlokas, TET associate and SAWEA/SAPVIA Joint SED Working Group Deputy Chair PICTURE: BIOTHERM ENERGY 21 Proudly hosted and sponsored in part by Trialogue, Mergence Investment Managers and the Industrial Development Corporation, facilitated by the Transformation Energy Trust