Why renewables-linked community trusts are struggling to make an impact

Since the launch of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), 77 renewable energy utilities have become operational in South Africa. The communities surrounding these energy utilities stand to benefit from these investments, but for many reasons, these benefits have often failed to materialize. The question at hand is whether community ownership through trusts is an effective tool for energy projects to deliver community development. Zoheb Khan, the Social Economy Research Manager at Intellidex, recently discussed the challenges faced by community trusts in South Africa. According to Khan, the current structure of community trusts is not as effective as it could be due to various reasons. One of the main issues is the financing arrangements for these trusts. They are typically financed through debt, with high-interest rates and onerous repayment terms, leading to a significant portion of the trust's income being used for debt servicing for up to 10 years. As a result, the trusts are unable to engage in meaningful community development work, causing frustration within the communities. This lack of engagement can sometimes escalate into community unrest, jeopardizing the projects and operations as a whole. Khan suggests that improvements need to be made in the terms of loans or equity finance for the trusts to ensure that income reaches the trusts sooner, demonstrating their value to the communities. He also highlights the importance of trustees having the necessary skills and experience for community development work. Providing trustees with skills training programs could help address this issue. Additionally, Khan emphasizes the need for project companies to dedicate more time to community engagement, building and sustaining relationships with the communities they serve. Successful community trusts in South Africa and other countries have shown that investing in community engagement leads to long-term benefits, including community support and goodwill. In terms of time frame, Khan recommends extending the bidding window for establishing representative and responsive trust structures, allowing for more meaningful community consultation. While he does not suggest extending the period to the extent of two years, a few more months could make a significant difference. Overall, addressing the challenges faced by renewable energy community trusts in South Africa requires improvements in financing terms, trustee skills and experience, as well as a stronger focus on community engagement.