As the 25 successful preferred bidders from Bid Window 5 of the Renewable Energy IPP Procurement Programme (REIPPPP) prepare for financial closure, budgeting accurately becomes critical. During the upcoming construction phase, the labour component makes up a significant portion of this budget, but getting this costing right can prove challenging. Oxyon People Solutions, specialists in recruitment around energy and utilities, are geared to assist.
“One of the requirements of the project is that 40% of the total cost must be sourced locally. Since the components and technology to build the plants must be imported, meeting local procurement requirements means sourcing labour locally. However, many of the successful bidders are global entities that may not fully understand the intricacies of the South African market and labour force,” says Viren Sookhun, MD at Oxyon People Solutions.
“All of the IPP projects are being constructed in rural areas, where there is often low income, high rates of unemployment and a lack of service delivery. There is therefore significant potential for these projects to create friction if they are not appropriately handled. Successfully negotiating with local communities is critical, which requires established relationships with the community leaders and ward councillors,” he adds.
Having the right partner
One of the most significant challenges is that labour costs in these areas can be a lot higher than anticipated, because each community may demand different wages, which are often a lot higher than the minimum wage that is budgeted for. Having the right partner is key to successfully engaging labour and businesses to find a middle ground that is agreed upon in writing, which will help to alleviate problems and potential industrial action down the line.
“In such a volatile environment it is essential to lock these details in from the outset. Any project delays, such as strikes or unrest, could result in power producers being unable to connect on time, which in turn will result in penalties. Oxyon can assist with identifying key stakeholders ahead of time, and we have vast experience and existing relationships with leaders in these communities, so we can help new IPPs to budget effectively and accurately and guide projects from beginning to end,” says Sookhun.
In addition, as part of Workforce Holdings Ltd, Oxyon has the collaborative capability to create sustainable employment and community development. Through partnerships within the holding company, Oxyon can provide training to upskill employees through qualifications that will uplift communities and enable them to find employment once projects conclude. In addition, IPPs are able to outsource all of the admin tasks around labourers, including human resources, payroll, industrial relations and more.
“In projects such as the construction of IPP plants, any delays could cause significant dents in profitability and viability. Having a local partner is essential in smoothing over potential bumps and hazards throughout the process, from bidding through to establishing, distribution and maintenance,” Sookhun concludes.