DTi rule pulls plug on solar geysers

The local low-pressure solar water heater industry says it has been killed because of “technical red tape” that has disqualified almost all South African companies from manufacturing these geysers for the government’s mass installation programme. For the last 18 months the industry has made appeals to the Department of Trade and Industry (DTi) to change the technicality, which deals with the percentage of local content required. In December 2012, Eskom stopped the mass roll-out of its low-pressure solar water heater scheme to the poor, intending to replace it with a contract tender scheme. But this never happened and Eskom says it was because no companies qualified under the DTi’s requirements.

A survey by Sustainable Energy Society of Southern Africa (Sessa), which represents about 400 solar water heater companies, estimated that at least 4 500 jobs had been lost, with some investors having lost their homes and pensions. Factories have closed down or have been mothballed and thousands of brand-new low-pressure geysers have been sitting in warehouses for 18 months. James Green, chairman of Sessa’s solar water heating division, said yesterday: “An industry has been destroyed by red tape. It is a tragedy that hundreds of companies have been put out of business. This has caused severe financial hardship to many small SMMEs that set up locally around the country, creating local employment.”

In July 2013, the department made the low-pressure solar water geyser a “designated product” under government procurement rules. It ruled that both the tank and the collector tubes, which absorb the sun’s radiation to heat the water, must each have 70 percent local content. However, there is not a single manufacturer of tubes in South Africa. Green said local companies made the tanks and frames, but although several companies had looked into setting up tube factories, they could not compete with the low costs of China, which had cornered the world market. “You would have to import the raw material from China or Turkey, you would need a 100 percent reliable electricity supply and you would have to have a workforce cheaper than China,” he said.

With no local tube manufacturers, companies could not qualify under the government procurement rules, and the industry ground to a halt. “If the DTi made it a 70 percent overall local content, there would be no problem, because overall we’re already at over 80 percent local content. But they won’t.” Most jobs were created in the installation and maintenance of solar geysers. President Jacob Zuma had said 1 million solar geysers would be installed by March this year. The Treasury allocated R4.7 billion to the Department of Energy, of which R3bn |was to be used for a mass |roll-out of low-pressure solar water heaters installed at no cost to consumers on low-cost houses. About R1.5bn would go to pay consumers rebates on solar geysers of between 25 to 40 percent for high-pressure geysers.

Eskom spokesman Andrew Etzinger said to date about 400 000 solar geysers of the government’s million target had been installed, of which about 80 000 were high pressure and 320 000 low pressure. Eskom had received R2.471bn from the Department of Energy and would be returning R1.8bn to the department at the end of the month when it takes over as the implementing agent. Etzinger said: “The industry can do 75 to 80 percent local content overall. A solution would be to combine the two parts and look at an aggregate level.” Eskom had gone to tender for the low-pressure systems, but no system had complied with the requirement, so no tender had been granted.

The DTi’s Gerhard Fourie said it had no intention of changing the 70 percent requirement for both the collector tubes and the tank. He believed nine companies did qualify under the rules for local content in collectors. However, these were for flatplate, not tube, collectors. But Green said flatplate collectors were not used with low-pressure solar geysers because they were inefficient, expensive and not freeze-proof. “DTi’s asking us to make a product that doesn’t work.” The Department of Energy said it would comment later this month when it announced how it would take over implementation of the solar water heater programme.